Driving instructors – buying or leasing?
As you might expect, leasing starts with choosing a brand-new car
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As a driving instructor, especially if you are independent and run your own driving school, you will likely face an important decision when it comes to replacing (or finding your first) dual-control car. However, will it work better for you to purchase or lease?
Leasing your dual control car
As you might expect, leasing starts with choosing a brand-new car. Something you actually want to drive, but also with the specification you need for teaching. With car technology rapidly moving forward with the times – driving lessons have too, meaning your pupils may prefer to learn in something new and relevant to the type of cars they will be driving in years to come.
The demand for leasing is still on the rise, with the BVRLA reporting at the beginning of the year that personal leasing saw its highest level of growth (14% year on year), with personal contracts now accounting for 1.9 million cars in the UK. But this doesn’t just seem to be the trend for personal drivers – according to Intelligent Instructor’s March 2019 magazine, it is estimated that 1 in 4 driving instructors now lease a car.
So, how does leasing work?
With leasing, you won’t own the vehicle, or pay the full retail price of the brand new car – you’ll simply pay a monthly rental towards the vehicle to use it for a set period of time. You won’t have to worry about re-selling the vehicle, or depreciation – that’s all covered in the cost and the leasing company will take care of it for you. You’ll just need to keep the car in good condition and hand it back at the end of the contract.
We’ve broken it down for you into a few steps below…
1. Choose a car of your choice
Whether you have a specific car in mind, or are thinking about a few different options – almost any current manufacturer car model can be leased. The good news is that Hitachi Capital can also fit that new car with dual-controls, to ensure it is suitable for conducting driving lessons. And, by working closely with manufacturers, we are able to offer great rates on cars which are frequently favoured by driving instructors. As a result, choosing to lease can mean driving a better car for less than you might expect, without tying up a large chunk of your hard earned capital in purchasing a brand new car outright.
2. Select your contract length, mileage allowance & any extras
Having selected a car you like, it’s time to look at the lease period and any other requirements you may have. Typically, this means agreeing a contract duration and a set mileage allowance, as well as any other optional extras for your vehicle or contract – such as signage, roof top boxes or factory fit additions. It would also be useful to have a budget in mind for your monthly rental and initial rental spend.
Your mileage allowance should realistically reflect how much time you spend on the road / how many miles you travel, so it’s important to be as accurate as possible when deciding this; particularly if you are using your dual control car for both personal and business use. The mileage you choose will directly affect your monthly payments, (a higher mileage will decrease the value of the car at the end of its lease, so this will be used to help the leasing company estimate a residual value that will determine your monthly rental costs) and, if you go over your agreed contract mileage, you will incur an excess mileage charge at the end – so make sure you allow for any unexpected trips or additional mileage. The excess mileage charge is typically calculated in pence per mile, and will vary depending on which car you choose. Your vehicle quotes should detail this information.
3. Let the leasing provider take care of the rest
Once all of the above terms are agreed, your monthly rental payments are fixed for the duration of the contract – which should help make budgeting easier, with no nasty surprises along the way. You will then arrange a suitable delivery date with the leasing provider and will soon be driving your brand new dual control car.
A key benefit of leasing is what’s included in the monthly payments. With Hitachi Capital, all dual control contracts include a maintenance and servicing package in the cost – which includes mechanical repairs and new tyres, meaning less hassle and admin for you and no sudden unexpected bills to pay if something does go wrong. It also protects you against supplier inflation costs, as the maintenance package is a fixed cost for the entire duration of your contract. What’s more, if your dual-control car is out of action for an extended period, Hitachi Capital will aim to send you a replacement dual control car within just 48 hours, meaning you can carry on with your driving tuition and avoid losing valuable time and money.
In fact, the benefits stretch right through to the end of the contract, because you don’t need to worry about how market conditions have affected the car’s value and there’s no need to waste time trying to find a buyer. To renew your contract, simply choose a new dual-control car and then get on with your business and your life.
– Option to drive a brand new vehicle every 2-3 years, without large up front payments
– Monthly rental payments are fixed, easy to budget, and generally less costly than personal car loan / hire purchase repayments, as you won’t own the vehicle
– Road tax and breakdown cover will be covered for you
– No need to worry about depreciation or re-selling the vehicle
Buying your dual control car
Purchasing your vehicle outright may seem more straight forward than leasing, especially if it’s the method of funding you’re used to, or more comfortable with. It also may be more suitable for you if you don’t wish to be committed to a contract longer than 24 months, if your mileage is unpredictable, or if your circumstances or career are likely to change in the near future.
How would buying my car outright work?
There are various ways to purchase your brand new car outright – with personal loans and hire purchase agreements being two of the most popular. A personal loan will give you instant ownership of the car; however, you will be tied to an interest rate and if you miss a payment, the lender may still be able to take court action against you if you do not pay. Hire purchase involves paying an up-front deposit, typically between 10-50% of the value of the vehicle, then fixed monthly payments, until the full value has been paid off. You do not legally own the vehicle until the final payment has been made. Unlike leasing however, with both hire purchase and personal loans, you will take ownership of the vehicle.
It is important to remember you’ll likely have to pay an interest rate on any loan or finance agreement, and you will also be tied to paying money back over an extended period of time as you will be paying for the full cost of the vehicle.
– You wll immediately own the vehicle, so any money made from the re-sale is yours
– You don’t have to commit to an agreed annual mileage limit
– Monthly payments will eventually stop when the car has been paid for, and you will then own it
– You are free to modify the vehicle as you please
– You won’t be charged for wear and tear or excess mileage on the vehicle (although this could impact the resale value)
You may be thinking…
– Leasing and purchasing both involve a monthly payment, so what’s the difference?
Leasing offers far more certainty over the true ‘whole life cost’ of running your dual-controlled car. Not only is the monthly fee fixed, but it also covers other costs such as repairs and new tyres. Combined with being able to access the buying power of a business who buys millions of pounds worth of vehicle stock a year, leasing often ends up much cheaper than any form of purchasing.
– Does leasing limit my choice?
If anything, leasing does quite the opposite and invariably expands your options. Hitachi Capital works with multiple vehicle manufacturers and can convert practically any car into a dual-control version. You also get to choose a different brand-new car at the end of the contract, so there’s no need to end up stuck with the same ageing vehicle for years to come.
– Will I be trapped in a long leasing contract?
Absolutely not, the decision on contract length is up to you. Hitachi Capital’s customers can sign up for a lease of anywhere between 24 and 36 months.
– Are there any hidden costs?
Firstly, leasing with Hitachi Capital is an open and transparent process, with all costs clearly explained. This means that provided the car doesn’t sustain any damage beyond fair wear and tear, and that the mileage allowance is adhered to, there are no extra costs to pay.
And just to put your mind at rest, costs relating to any potential excess mileage are agreed at the start of the contract and any charges for vehicle damage are strictly monitored by the BVRLA (British Vehicle and Rental Leasing Association) to ensure they are true and fair.
For more advice from Hitachi check out their blog