Home Car Insurance Disadvantages of Private Leasing

What are the disadvantages of private leasing?

With a private lease, you can drive a new car without having to pay a large sum all at once. Maintenance, vehicle tax, and car insurance are included in the monthly payment. You also don’t have to worry about depreciation or unexpected repair costs. You know exactly what you’re paying each month and get to drive a modern, fuel-efficient car. But it isn’t always cheap or cost-effective: here are the downsides.

"Starting at" prices can be misleading

The rates you see in ads often seem low. However, these are starting rates. For example, under such a contract, you may only be allowed to drive 1,000 kilometers per month. If you drive more than that, your monthly payment will increase, or you’ll pay a surcharge of, say, €0.10 per kilometer. In addition, you often pay extra if you have few claim-free years. So while private leasing may seem affordable at first, it can end up being a lot more expensive.

Long-term contracts

Lease contracts usually last three or four years. That may seem straightforward, but the total costs are high. At €399 per month, you’ll pay more than €19,000 over four years. These costs are in addition to your other fixed expenses. If your situation changes—for example, due to unemployment, disability, or a divorce—the monthly payment can suddenly become too much to handle. You usually can’t just cancel the contract. If you terminate it early, the costs can skyrocket, because leasing companies often charge high penalties.

You are always partially responsible for the damage

In the event of a claim, you often have to pay a portion of the costs yourself—this is known as the deductible. The amount of the deductible varies by provider. Sometimes you can waive the deductible by paying a higher monthly premium. That may seem appealing, but it does result in additional costs. So it’s important to read the terms and conditions carefully.

Lower Mortgage Due to Additional Monthly Expenses

If you want to buy a house, a private lease can be a problem. When determining your maximum mortgage amount, banks always take your fixed expenses into account. The monthly payment on your lease is fully factored into this calculation, even if the lease is only temporary. Sometimes, you can only get a mortgage if you pay off the lease in a lump sum, which can cost thousands of euros.

You are not the owner

A major drawback of private leasing is that you never actually own the car. When the contract ends, you return the car. If, on the other hand, you buy a car yourself, it remains yours and you can sell it later. When you sell it, you often get some of your investment back, whereas with leasing, you don’t build up any equity.

A Used Car as an Alternative

A newer used car can be a good alternative to a private lease. Such a car is usually cheaper to buy, and the bulk of its depreciation has already occurred. Maintenance costs are often minimal, and you decide for yourself where and how to insure the car. By comparing car insurance policies, you can save a lot of money. The biggest advantage is that the car is entirely yours, and you’ll recoup part of the cost when you sell it.

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