There’s a good and a bad side to everything. The same principle applies while leasing a car as well. The concept is getting popular in Malaysia lately with many young professional going for leasing a car than purchasing it. If you are contemplating to lease a car, It is necessary for you to look at both sides of the coin before deciding.
What is Car Leasing?
Car leasing is when you obtain a new car for a fixed period of time by paying a certain sum of money. People opt for car leasing as the lease payments are much lower when compared to car loan instalments. You will also be able to get amazing lease options from various service providers.
However, you won’t have ownership rights to the car you lease; it will belong to the provider who has leased it out to you.
Car Leasing Options in Malaysia
Leasing a car is slowly gaining popularity in Malaysia. According to a report, the fleet size for car leasing could rise to 40,000 in 2021. There are more than 250 providers that offer leasing in Kuala Lumpur, Johor Bahru, Ipoh, Petaling Jaya, and many other cities in the country.
Some car leasing companies even go an extra mile to understand their customers' requirements. They help customers find an ideal car that suits their lifestyle requirements and also fits their budget.
You will also find companies that provide emergency and breakdown assistance. If you want a car on lease, you can compare various makes and models of cars as well as different car specifications and features.
Details of Some Lease Service Providers in Malaysia
|Service Providers||Phone No.|
|Europcar Malaysia||+603 40 42 88 18||[email protected]|
|Avis Malaysia||+603 7803 7555 1 800 88 AVIS (2847) (24/7 toll free)||[email protected]|
|WS Rent-A-Car (WSRAC)||+ 603 4256 6999||[email protected]|
|Hertz Malaysia||+ 603 7966 7000||[email protected]|
|My Motor Malaysia||+ 603 7664 8500||[email protected]|
|Mayflower Car Rental||+ 603 6253 1888||[email protected]|
|Drive.MY||(+60) 01 7204 3348||[email protected]|
|SPANCO Malaysia||+ 603 – 2775 0888||[email protected]|
How Does Car Leasing Work?
Once you have shortlisted a car leasing company, you can browse the fleet available to choose the car you want. You can then approach them to finalize the agreement. Don’t forget to negotiate to get a good price. Before signing a lease agreement, you need to look at the costs and taxes you will be paying.
Some of the costs include the monthly cost of the vehicle, depreciation costs, title fees, security deposits, and acquisition costs.
A lease usually comes with a mileage allowance. If you have exceeded the mileage allowance, you will be charged for excessive mileage. So when you opt for a car, check how much mileage you will be getting and roughly calculate if it is what you need for your commute or not. Unlike the case of car loans, when you make a lease payment, you pay for using the car instead of purchasing the car.
It is important to go through the lease’s terms and conditions. Check the agreement properly to see if you there are any hidden charges. Once the lease period ends, you just have to return the car back to the company and pay the final lease amount. In case of wear and tear during the lease period, you will be expected to pay additional fees.
Some companies recommend that you take a lease gap insurance, so that they are covered in case the vehicle is stolen or damaged. Without insurance, you will have to pay the lessor the difference of the car's value and the remaining lease payments.
Why Should You Lease a Car?
Lease Payments are Lower than Car Loan Instalments
You can choose to lease over buying as the lease payments are lower than the actual car loan instalments. If the interest rate is lower for lease than on a car loan, then it is wise to go for leasing.
Lease Offers Can Save You More
Similar to bank promotions, if you can manage to get a good deal from the lessor, it is always profitable to go for lease over purchase. Say, you can get a discount on the interest rate or monthly payable instalment amount. If you can get a car in good condition at a low price, you shouldn’t miss the opportunity.
A car lease contract usually lasts for 3-5 years. Every time a lease contract gets over, you can choose another brand new car to drive. Leasing suits those who are crazy about driving all the new cars available in the market. It wouldn’t be a nice idea to sell your car for another new car in the market as the resale value of your current car would have depreciated.
If You Need a Car for a Short Period
Need a car on a short-term basis? Lease it than buying a brand new one; it will help you save more. It doesn’t make cognizable sense to purchase a car and pay the loan instalments for the next 2 years when your stay in Malaysia is for a short period of time. Also, a car’s price depreciates over time. So, when you leave and sell your car to another party, chances are that the selling price might not even cover the car loan amount. On the contrary, it is a simpler deal to just take a car for lease, use it until you are in Malaysia, and then return it.
Warranty Never Expires
A purchased car comes with a limited number of warranty years. But in the case of leasing, the car comes with a warranty for the entire lease period on papers. So, you don’t have to worry about repairs and finding original spare parts for your car. If there is some issue, you can just drop the car at the lessor’s disposal and get everything fixed without spending from your pocket.
No Hassles of Selling the Car
You don’t have to go through the hassles of selling your car if you lease one. You must know that a car is a depreciating asset and loses its value as the days pass. Instead of waiting for a person who buys your car, making negotiations about the price, and transferring ownership to the buyer, you can keep things simpler with a lease arrangement. Just return the car to the dealer when you no more need it.
Low Upfront Payment
Based on the dealer you choose to rent the car, you have to make a minimal to no down payment. You don’t have to save a large chunk of money to make down payment as in the case of purchasing a car. Leasing lets you use the saved funds for something more important.
The Other Side of Leasing a Car
Credit Score Matters
You need to have a top-tier score with a minimum of 660 to get a decent interest rate. Similar to getting a car loan to buy a car, leasing also requires you to maintain a good credit history.
Extra Penalties and Fees
The car lender specifies an allowed mileage per year when giving you the car on lease. Be mindful, if you exceed the specified mileage limit for any reason, you are supposed to pay a penalty. Any damage caused to the car, major or minor, will cost you extra ringgits. Though you will not be taking care of the entire repair cost, you will still be paying something more than the just the rental cost.
You Don’t Own the Car
When the lease period ends, the car is not yours anymore. Based on the residual value of the car, you can still choose to buy the car. In case you can’t afford to make the residual payment, then you have to give up on the car and look for another one.
High Insurance Excess
A policy excess will be applied to your car insurance. The excess includes the maximum amount possible for certain claims you would be paying from your pocket. Rest of the expenses in case of claims will be paid by the insurer. It is considerably low when you own a car than when you lease it. You may have to pay a minimum of RM1,000 for the “excess” charges.
You cannot keep a brand new car model in mind and wish to get it for lease. In another case, if you lease it from a dealer, you will not have options from different manufacturers. You will have to check out the available car models and collect information about its age, mileage, and other related things before picking on a car.
How to Get the Best Deal on a Lease?
You can follow the below tips to get the best lease deal:
Finding an Ideal Leasing Company
To search for an ideal car leasing company, you need to research of different service providers in the country. You need to do also find reputable companies with years of experience in the leasing business.
Choose the Car You Want
Most of us have various requirements when it comes to a car. While some might prefer cars with more mileage, some might want something fancier like an SUV. Go through the fleet offered by the leasing provider and choose the one you like.
Each car will also come in different models – child-friendly, better security features, petrol/diesel version, etc. If you have a specific car in mind, compare the prices offered by each company and choose the one that is within your budget. Don't forget to look for car leasing offers to make a decision.
Take the Car for a Test Drive
You will be driving this car throughout the lease period. To ensure it’s the best one for you, take the car for a test drive. If you are not satisfied with the drive, you can look for other options as well.
Discuss the Price and All Other Costs
The payments will be as per the price you have discussed with the lease provider. So negotiate with the company till you get the car for a good price. Ask them if there are any other costs you will be charged before, during, or after the lease period.
Sign the Agreement
Once you have gone through the lease agreement in detail and have your queries cleared by the salesperson, go ahead and sign the agreement. A lease agreement will consist of the costs the lessee has to pay, the mileage allowance, the total lease term, the residual value of the vehicle, any other costs and charges.
Some lessors add a clause giving the lessees an option to buy the vehicle at the end of the lease period.
Check all the pros and cons of leasing, use your logic based on your requirements and decide. If you are still sticking on to leasing a car, here you go with an interesting bit of information. Volvo cars are now available on lease programme where the monthly lease payment starts at RM2,692 inclusive of road tax, comprehensive insurance coverage, and maintenance cost.
You can also get petrol vouchers if you subscribe for the programme within the promotion period. Another good news is that renting/leasing a car will not be reflected in your credit report. So, think about it!
Q. Can you lease a car for 1 month?
A. This will depend from one leasing company to another. Lease companies are usually reluctant to offer new cars on lease for just a month. Not only does this affect the residual value of the car but it could even be a loss for the company. Instead, they could lease out the car to another lessee and make more money through the monthly payments.
Q. How much does leasing a car cost per month?
A. Each car leasing company consider different factors to determine the cost of the lease programmes. While some companies charge per day, some charge per lease term. The car’s original price is also considered. In Malaysia, makes and models of Proton and Perodua are usually available at low rates. On the other hand, SUVs and convertibles are available at high rates.
Q. Is it worth it to lease a car?
A. People generally opt for car leasing as they come with lower initial and monthly payments. You can even get a new car on lease after the lease term of another vehicle ends. Most lease companies offer warranty for their vehicles. So if you are leasing out the car for a few months or years, the warranty will cover all the potential repairs and maintenance work during the lease term.
Once the lease term ends, you will have to return it to the lessor. If you are looking for a vehicle for a longer term, you could consider buying a new or a second-hand vehicle.
Q. What should you know before leasing a car?
A. Before leasing a car you need to know certain terminology associated with car leasing:
Lessee and lessor: While lessee is the person who leases a car from a leasing company or a car dealer, lessor is the one who leases a car to an individual.
Residual value: The residual value is the estimated value of the vehicle at the end of the lease term.
Mileage allowance and excess mileage: The number of miles the lessee is allowed to drive during the lease period. If the lessee drives additional miles, they will be charged a fee for the excess mileage.
End-of-lease purchase price: This is the price the lessee agrees to pay the lessor if they want to buy the car after the lease period.
Depreciation and depreciation fee: The amount by which the value of the car decreases is called depreciation. It is usually the difference between the car's original price and the estimated residual value at the end of the lease term. The depreciation value divided by the number of months of the lease term will give you the depreciation fees.
You should also know the total costs you need to pay, including the hidden fees and charges the lease term, the money factor, and the lease terms and conditions.
Disposition fee: The fee charged to the lessee when the vehicle is returned at the end of the lease term.
Q. Do you pay interest when you lease a car?
A. When you lease a vehicle, you will come across the term money factor', 'lease factor', or 'lease fee'. Similar to interest rate, money factor is charged on leases with monthly instalment payments.
Q. Can you lease a car with bad credit?
A. When you have a poor credit score, it could be a little difficult to get a car loan from banks and other lenders. So people with bad credit usually opt for leasing. When you lease a vehicle, your monthly payments are lower than monthly loan instalments. Also, you don't have to worry about the car's maintenance, as the leased vehicles are covered under warranty.
Most importantly, making your lease payments on time is a good way to increase your credit rating. However, if you are planning to lease a vehicle, you need to research properly. Opt for a dealer/leasing company that offers a lower rate of interest. Additionally, sometimes you might have to arrange a security deposit as the lender could doubt your creditworthiness.