The opportunities of private lease

It has been a while since I posted my last article on this blog, but I noticed there was no significant drop in pageviews. Apparently, sites like Google have been getting better and better to find my articles, which resulted in a steady growth in numbers.

Still, it feels right to write an article about a phenomenon getting very popular in the Netherlands (and maybe some other European countries too). I’m talking about private lease, a financial solution that lets regular consumers lease a new car from a dealer or leasing company including insurance, ownership taxes and maintenance for a fixed monthly price. Using this solution, it is possible to drive away with a brand new car from your dealership for as low as 200 euro per month, only excluding gas. Just as with ‘business leasing’ via your employer you are not actually owner of the car and therefore have to return it after a fixed amount of years and kilometers.

Over the past months the topic has been researched a lot by consumer organizations to find out whether the deal sounds as good as it seems too, or if there is catch. Much to their own surprise, they concluded that private lease is almost always better for your wallet than buying the same car with borrowed money, and sometimes even better than buying with your own saved money (of course the low interest rate of present times plays a large role in this).

This does not mean private lease is for everyone. Almost all leasing companies have to take certain things in account to receive the ‘keurmerk private lease’, a label that offers guarantees for consumers so that they’re not ripped off. Apart from protecting consumers though, the label also protects lease companies from people not really able to afford the solution of private lease. Par example, consumers have to upload proof of their monthly income and rent / mortgages, and then after a black box of calculations a figure appears which is the maximum amount they can spend on private lease every month. If you have a family with a few kids and only an average income, chances are you do not qualify for private lease because after income and costs are weighed, there is not enough financial room left to lease.

But for those who the system benefits more (par example families with two incomes and no children, or a single income still living in with their parents) there is quite some room to find a nice deal. I myself am considering private lease because since a few months I have a steady job and the idea of driving a new car with less risk and uncertainties seems appealing. After a bit of research I found myself able to par example lease a new Mazda MX-5 Miata or BMW 1-series within my budget (but only just within).

The main downside for me is the fact that I’m stuck with the car for 36 months, up to now I’ve changed cars two times in two years, because I like to drive and experience as many nice cars as possible. Also, if you want to buy a house the bank takes your lease into account which results in a lower maximum mortgage. Finally, at the end of the lease term the is no rest value – you hand in the car and get nothing in return.

But as it appears, the solution seems to gain popularity fast and every month more consumers switch from full ownership to private lease. I personally would advise to all readers to at least consider the option, whether its something for you depends on much weight you contribute to all the pluses and minuses of the phenomenon.