You can choose from among three variants when you lease a vehicle:
- Mileage leasing
- Residual-value leasing
- Use-based leasing
Mileage leasing is a very common and convenient form of leasing. At the beginning of their leasing agreement, customers who choose this variant only need to provide information on the number of kilometers they plan to drive the vehicle and the duration of the agreement. The rule of thumb here is that the greater the total mileage, the higher will be the monthly leasing payment. Before you conclude such a leasing contract, you should therefore be able to estimate how often you will probably drive the vehicle. After all, if you only clock up 10,000 kilometers per year, your monthly payment will be correspondingly lower than if you drive 20,000 or 30,000 kilometers with the vehicle. If you end up driving the same distance as your estimate, you won’t incur any additional costs when your leasing period ends. If you exceed your estimated mileage, you simply pay the difference for the additional distance driven. This surcharge per additional kilometer is stated in the leasing contract. Conversely, you get money back at the end of the contract if you drove fewer kilometers during the leasing period than was agreed upon. As you can see, mileage leasing is transparent, and there are also no big surprises in the form of additional costs when your leasing period ends.
With residual-value leasing, the residual value of the vehicle at the end of leasing period is calculated before the leasing agreement begins. This value depends on the length of the leasing period, the mileage, and the projected loss of value of the vehicle during the leasing period. The monthly leasing payment is calculated on the basis of the residual value. Although the monthly payments are often lower for residual value leasing than for kilometer leasing, the lessee bears the risk if the residual value at the end of the contract’s duration is not as high as originally calculated. In this case, the lessee has to pay the difference. Such a situation could occur if the leasing period has a duration of more than one year, for example, and political decisions made during this time affect the vehicle’s residual value — e.g. driving bans in inner cities, subsidies for new vehicles, rapid technological developments.
In a traditional leasing setup, the customer estimates the mileage they expect to put on the vehicle during the entire leasing period. If the customer exceeds this estimate, an additional payment will be due when the leasing agreement expires. With use-based leasing, which is also known as dynamic leasing or pay-as-you-drive leasing, customers pay a basic fee and beyond that only pay for the actual number of kilometers driven. Here, the customer agrees to allow data on vehicle mileage to be
The monthly leasing payment depends on several factors. The first involves the leasing variant you choose — i.e. mileage or residual-value leasing. Your payment also depends on the gross list price of your dream car, the number of kilometers you plan to drive, and the length of your leasing period. You can reduce your monthly payment by making a one-time payment at the start of your leasing agreement. If you opt for a full-service package that includes maintenance, a warranty, or insurance, for example, the services you choose will be factored into your monthly payment. This also means that you won’t incur any extra costs during the leasing period and will therefore have a good overview of your total costs right from the beginning. You can use the leasing factor calculation to compare leasing offers: The monthly payment divided by the gross list price and multiplied by 100. Lower the leasing factor, the better the offer.
As a lessee, you will want to take care of your leased vehicle as if you owned it yourself. This means you should regularly service your vehicle and make all necessary repairs. Keep in mind that the vehicle will be closely examined when you return it. Minor signs of wear that are normal for the leasing period in question will not be a problem — but major damage will be, and such damage will result in you having to pay for any associated loss of value. It therefore makes sense to include the most important vehicle service packages in your leasing package — e.g. maintenance, servicing, tire care, etc. Warranty extensions also make sense if the manufacturer’s warranty will expire before the leasing period ends. Moreover, although you are not obliged to purchase collision and comprehensive insurance coverage, it is advisable for you to do so if you lease a vehicle. Many leasing companies include auto insurance in their leasing packages, which means all costs are included in your monthly leasing payment and you know how much you will pay in total each month. This will make your leasing experience transparent and also simplify your cost planning.
Yes, you can also lease your next used car. Used cars are worth less than new ones, which means the monthly leasing payment for used cars is lower. As is the case when you lease a new car, you can also add our service products such as the maintenance package, warranty package or vehicle insurance package to your monthly payment when you lease a used vehicle. This means that despite your vehicle’s higher age, you won’t need to worry about additional costs for inspections and repairs, for example.
Leasing offers an advantage in the form of a clear overview of monthly costs, with no additional surprises. In addition, if you choose service leasing, your leasing agreement will cover all key services, such as tire replacement, maintenance, inspections, and auto insurance, all of which will be calculated into your monthly payment. Leasing is also an interesting option for anyone who likes to always drive the latest vehicle models or enjoys trying out different models and variants. That’s because leasing agreements usually run for two to three years, after which you return your vehicle and can then lease a new one. In other words, you’re not the owner — and that means you also don’t have to worry about selling your car. Leasing offers another benefit in that unlike the case when you purchase a vehicle, you only have to make monthly payments, which means you have more money at your disposal for other investments. Business owners also benefit from leasing because tax laws allow them to deduct their entire monthly leasing payment as a business expense, thereby reducing their tax burden for as long as they lease a vehicle.
The things they have in common:
With both leasing and three-way financing, you pay a monthly amount that is calculated on the basis of your planned annual mileage, the term of your leasing/financing contract, and the amount of any optional initial payment you might make at the beginning of your leasing/financing agreement.
With leasing, you return the vehicle to the lessor at the end of the leasing period — and this is the case regardless of whether you opted for mileage leasing or residual-value leasing. With three-way financing, on the other hand, you have three options when your agreement ends: You can pay the final installment (balloon payment) and assume complete ownership of the vehicle, you can take out follow-up financing to pay the final installment, or you can simply return the vehicle the way you would in a normal leasing agreement. The final installment is usually equivalent to the residual value of the vehicle at the end of the agreement period as calculated at the beginning of the agreement. As borrower, you can also organize the sale of the vehicle. If you are able to sell the vehicle for a price that is higher than the amount of the final installment, you can pay the installment and then use whatever is left over to make a one-time payment to finance another vehicle. If you want to return the vehicle, the procedure is the same as with a residual-value leasing agreement: If as a result of excessive wear or damage from an accident the sale price of the vehicle ends up being lower than the originally calculated residual value, you will have to pay the difference. Important note for business owners: Unlike the case with leasing, only the interest portion of your financing installments is tax deductible when you finance a vehicle. The value of the vehicle itself is written off over a certain period of time.