How car leasing works for the lease company

The lease company is banking on providing a lot of cars to a lot of customers, and so it is able to get them at a good wholesale price. But rather than sell them on right away, they plan on selling them in several years time as used cars. In the meantime, they will lease it to you.

You may have assumed that they are making their money out of you because you are paying them the monthly fees, but the reality, is you are just covering the cost of the devaluation in the few years you are in possession of the car.  They actually make their profit after you return the car, and they sell it at auction.

It isn't important to understand how all this works and how exactly the sums add up, but it is important to completely change your mindset and reframe what is actually happening. This means that what the lease company wants is the car back in good condition, so they can get a high price for it at auction. It doesn't have to be perfect condition, but if it is in very good condition, they can get a higher price.

This means that you  are the caretaker of the car, which is their investment. 

There is an old comic expression, "Drive it like it's a rental", and unfortunately, some people will have this mindset. The BVRLA guidebook provides us with several stories of people who thought this way, including the story of somebody who returned the engine in a holdall, and the person who decided the boot was a good place to mix cement. If the contract you are given from the lease company may seem a little strict, keep in mind, that they have seen it all, frequently!

In our experience, the lease companies are generally fair and if you keep in mind what they are trying to achieve, you should be in a win-win situation with them. The hot take is that if you are a good caretaker, and hand them back a car which they can sell for a good price, you won't be penalized, and you may even get a better deal on the next one. If you are a fleet manager, this can certainly be the case.

Written by Danny Argent. Last updated 16/06/2022 15:51