Leased mobility
Leasing is a very common form of finance: Every second car is leased nowadays.
A combination of rental and hire-purchase
A leasing agreement is a legally undefined contract for the transfer of use for a period of time. For the typical lease agreement for moveable goods, a 3-party relationship is characteristic: while only the lessor and the lessee are parties to the leasing agreement, the supplier plays an important role in settling the contractual leasing relationship. As with rental, you pay a monthly charge for use and loss of value. Unlike rental, with a leasing agreement, you also need to take up the costs of maintaining, taxes and insuring the vehicle. You need to arrange fully comprehensive insurance at your own expense. If the car breaks down, you still need to keep paying the leasing charges.
Most leasing agreements stipulate that the leasing company makes no guarantee at all. However, the guarantee claims from the legal purchase that the leasing company is entitled to against the car supplier (garage owner) are normally transferred to the lessee for independent assertion. Therefore, the person to contact regarding complaints is primarily the car supplier. However, the leasing companies are to be regularly informed if problems arise during the remedying of defects.
After the agreement expires, you have to return the car to the leasing company. At best, you may then be able to buy the car or take out a further leasing agreement at a considerably lower rate.
Premature termination of the leasing agreement
The leasing agreement is entered into for a fixed term, normally for 48 months. You can terminate it prematurely. However, the leasing charge will then be recalculated for the shortened term and you will have to pay increased leasing charges backdated over the entire term of the agreement. You will be billed for the surcharge plus compensation for excess mileage and repair costs.
If you have paid a deposit at the start of the agreement, it will be deducted from your final bill. Nevertheless, the final bill may still easily amount to several thousand francs. The amount owed must be paid within 10 days or 30 days. If you have to part with the leased car before the end of the originally agreed term because you can no longer afford the costs, you will be in a dilemma. You may not want to pay the ongoing costs of running the car or may not have the money needed to settle the final bill. Premature exit from a leasing agreement is often very expensive.
Tips
Before you lease a car:
- Steer clear of leasing companies that publicise the fact that ongoing debt-collection issues or existing debts are not a problem.
- Take out legal expenses insurance, which also covers disputes arising from the leasing agreement.
- Shop around for different deals.
- How high is the deposit?
- Does the leasing company ask for an "initial large leasing installment"? If they do, how much is it? What happens to it if you end the agreement prematurely?
- How high is the effective annual leasing cost? Is value-added tax included?
- How high is the residual value?
- What mileage is allowed per year? Ask for a mileage that reflects your needs.
- How much do you have to pay for excess mileage?
- Are you required to take out fully comprehensive insurance? How expensive is it?
- How much do you have to factor in per year for running costs, upkeep, insurance and tax?
When you return the car:
- Have the leasing company's final bill checked.
- Avail of the legal expenses insurance if you think that the final bill is too high. Amounts sometimes appear under "Repair costs," which you need not have to pay.
- Your car dealer or leasing company may give you the opportunity to buy the car at the end of the term of the agreement for a residual value price (which is often agreed beforehand). Work out whether it would not be better for you to buy the vehicle and perhaps sell it straightaway. However, while the car does not belong to you, you are not permitted to sell it without the leasing company's written permission.
Further Information
Touring-Club of Switzerland
