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The New Alfa Romeo Mito

What You Pay For When Leasing

Whilst not paying for actual ownership of the vehicle when leasing you are paying for a couple of different things. Your money will usually cover the predicted depreciation which will occur during your term, the finance fee and the sales tax.

Depreciation

Depreciation occurs whenever something becomes dated or used, and in the case of automobiles it happens at a rather rapid rate. Additionally, more expensive vehicles lose value faster than cheaper ones. For example, a Porsche 911 may lose £10,000 worth of value in its first year, where as a Toyota Aygo may still be sold for less than £1,000 short of its original price after a year. Once your term is over the car you leased is essentially second hand and will probably be seen as old. Therefore the lessor will not be able to sell the car for how much it was bought for or make profit, therefore you are basically subsidising the money that could have been made by the lessor on the vehicle. The depreciation value will be predicted based on how many miles you intend to do and how long you keep the leased vehicle for or the term of you lease agreement.

Finance Fee

In a sense the leasing company is loaning you the full price of the car you are leasing, this is because their money has paid for the car that the lessee is driving, and in turn their money is tied up. Therefore the finance fee to a lease agreement is the equivalent to the interest which is required to be paid when someone takes out a loan.