Understanding the rationale for a short term lease against the commonly believed idea that one should purchase a car.

Many people have the idea that when you go into a car ownership scheme, you are saving your money as you will end up with an asset. Though this is true to some extent but what most people do not realize is that CARS ARE A DEPRECIATING ASSET.

All car finance schemes are based on an estimated future residual value of the car. The bulk of what you pay during the lease or hire purchase period is the depreciation value. You are therefore paying for your usage of the asset rather than saving. Whether you will save only depends on what happens to the residual value of the car in the end of which finance companies are experts in predicting this value and they are always within the range.

The concept that you save when you purchase is therefore not really true. As the asset depreciates, costs of maintenance get high and the result is you never win. At EL-GS we advise that a car is an asset TO PAY FOR USAGE OF THE ASSET RATHER THAN OWN THE ASSET. When there is need to own an asset say for export of the car to another country, you simply buy from the used car market which will always be priced at the residual value which the finance leases are based on.

Excess mileage:
Any miles that may exceed the initial mileage specified in a finance agreement.
Example: contracted to use 36,000 miles over a three-year period and the vehicle is returned with 40,000 miles, the excess mileage is 4,000 miles.

Excess mileage charge:
A charge based on miles driven over the amount contracted in the lease agreement on return of the vehicle. The amount is calculated by taking the excess mileage rate of the vehicle and multiplying it by the number of miles covered above contracted miles agreed.

Excess wear and tear:
When the vehicle is damaged beyond normal expectations in an agreement term of a vehicle, charges are applied. Examples of excess wear and tear can be found in the Vehicle Return Standards section or in the Vehicle Return Standards brochure found in your Welcome Pack.