Calculating the Cost of Renting a Car

admin | April 14, 2014

Although the majority of motorists that drive every day choose to buy their own vehicle, either with cash or on credit, an increasing number are looking at renting as a viable alternative. If you were to request quotations from the kind of company that offers short-term rentals to visitors from overseas, you would probably come to the conclusion that it is financial suicide to rent instead of buy but if you take a look at the deals offered by firms that specialise in long-term corporate and private vehicle leases, the maths begins to look a lot more appealing.

To make it easier for people to evaluate the total cost of leasing a car rather than buying one, I have listed a number of key points to bear in mind when you are doing your calculations.

You don’t have to worry about selling a leased vehicle once you are finished with it. If you buy a car, whether on finance or an outright cash purchase, there will eventually come a day when you would like to get rid of it and drive something new. Owing to depreciation, it will be worth much less than when you bought it and if you borrowed money to finance the purchase, you could end up getting less for it than your outstanding debt in certain circumstances. With rental vehicles, there is no need to worry about depreciation or the hassle of finding a willing buyer when you fancy a new car.

Running costs are usually very similar. Whether you rent or buy, you will need to find money for fuel, regular servicing carried out by a qualified mechanic and cleaning products such as car shampoo, polish and wax. However, some firms offer optional maintenance contracts which cover regular services so if you would like to know in advance how much you will be spending on maintaining your vehicle every year, these contracts are worth considering.

Business owners can claim back VAT. If you run your own company and you are planning to use a rental vehicle for both business and pleasure, you should be able to reclaim at least 50% of the VAT that is included in the monthly rate. If you will be using it just for business, you may well be able to reclaim all of the VAT. In order to take advantage of these rebates, your business will need to be VAT registered so if it is not already, you might like to look at the possible benefits and drawbacks associated with registering in the future.

If your annual mileage is lower than average, your rental costs could be lower too. Long-term lease charges are usually based partly on vehicle depreciation figures and because a high mileage car will fetch less on the second hand market, drivers that cover a great distance during the course of a year will find that they have to pay more. Conversely, motorists with more conservative driving habits will benefit from lower rates. Most providers are quite flexible so if it looks like you are going to exceed an agreed annual mileage, they will simply adjust your monthly rate accordingly.

These are the key points to consider, as far as I am concerned. If you can think of any others then of course you should include them in your calculations before deciding whether to rent or buy your next car. There are pros and cons associated with both options but as many people seem unaware that leasing can be a very cost effective solution, I wanted to let other motorists know that they do have a real choice nowadays.

About the Author:

Leasing Options is a company in the UK that has over 8000 different vehicles for rent from different manufacturers. Their website http://www.leasingoptions.co.uk/ features information about their rental process.