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In many parts of New Zealand, a car is a requirement - the question isn't whether you should get one, but how you should get one.

There are two main ways: buy or lease.

Which is the better option for you? This comprehensive guide to car leases in NZ will help you find out.

How does vehicle leasing work in NZ?

Vehicle leasing is an effective way to secure a vehicle for people who don't have the funds to purchase one outright. Here's how car leasing works in NZ.

What does it mean to lease a car?

A vehicle lease is a contract that allows an individual or organisation to enjoy the use of a car for a certain period, usually in the range of 1-5 years.
During this time the leasing company (lessor) continues to own the vehicle - you (the lessee) simply pay a monthly fee to use it.
The monthly lease fees can cover many of the costs of owning a vehicle, from maintenance to depreciation. At the end of the lease period, you return the vehicle to the lessor.

Importance and benefits of car leasing in New Zealand

Why might you consider a car lease? There are several benefits to leasing a vehicle in NZ, including:
  • Low upfront cost: You can gain access to a car without having to spend tens of thousands of dollars.
  • Access to the latest vehicles: Lessors usually offer new (or new-ish) vehicles, and with lease terms rarely exceeding four years, you'll always be driving the latest wheels.
  • Less of a commitment: At the end of your lease term, you simply hand the car back to the lessor.
  • Less responsibility for maintenance: As the owner, it's generally the lessor's responsibility to partially or fully maintain the car.
  • Avoid depreciation: When you buy a vehicle your investment will lose value over time. Depreciation isn't a worry when you lease.
But there are also some important drawbacks to leasing, which leads many people to take out a car loan instead. These include:
  • Driving restrictions: You usually have a set amount of kilometres you're allowed to drive your car.
  • Wear and tear charges: You may face ‘refurbishment charges’ if the vehicle has excessive wear and tear at the end of the lease.
  • The cost of no ownership: While monthly lease payments can be lower than loan repayments, when you buy a car, you can sell it. When you lease a car you just have to hand it back at the end of the term.
  • Insurance: Premiums for leased cars can be higher than for owned vehicles due to the insurance demands of lessors.

 

Key Aspects of Car Leases in NZ

If you're considering taking out a car lease in New Zealand, it's important to keep the following factors in mind.

What is the best car lease term?

As a general rule, the shorter the lease term, the higher the repayments. Ideally, you'll take out the longest-term lease you reasonably can. Avoid upgrading your vehicle for no real reason.

Lease Direct vs. Dealership

There are two main types of vehicle lessors in NZ: car dealerships and dedicated car leasing companies.
Generally speaking, you'll pay a slight premium to deal with a dealership, but you cut out the intermediary: you enjoy the security of dealing directly with the brand that makes the car, who can service and maintain the vehicle themselves.

Choosing the Right Type of Car

How do you choose the perfect car to lease? By focusing on what you need, not what you want. Ask yourself how many seats and how much storage space you'll need, where and how much you'll drive, and the features that you will find truly valuable.

Managing the Leased Vehicle

When you lease a vehicle you need to be careful to follow the rules of the lease. Before you get driving, check the following:
  • Mileage limitations: How many kilometres are you allowed to drive? You may face high fees for going over the limit.
  • Insurance requirements: You'll generally need to take out comprehensive insurance, and there may even be extra insurance requirements on top of that.
  • Financial obligations: Make sure you are aware of all ongoing and end-of-lease costs, including early/late return fees, damage penalties and more.
  • Maintenance: Check who is responsible for what in terms of vehicle maintenance and servicing during the lease term.

Ending the Lease

A traditional operating lease will see you hand the car back at the end of the lease term. A less common finance lease will see you retain ownership of the vehicle. This option isn't taken up by individuals, but the tax deductibility of vehicle leases for businesses means that a finance lease may make sense for an organisation.

 

 

Financial Considerations

Ultimately a car lease is a financial decision. You can choose to lease a car, or you can choose to buy a car, either outright or using finance. Which is the best option for you? Consider the following:

A. Cash Flow Management

Leases are a great option in terms of managing your budget, as most of the costs of owning a vehicle are converted into a single, simple monthly payment. The same could be said for a car loan, but you'll need to account for more maintenance and servicing costs.

B. Tax Deductibility

Car leases are only tax deductible for businesses in NZ, so this will only apply to an individual if you are self-employed and you use your car for business purposes.

C. Selling the Car

When you lease a car, you don't own that car, so you won't be able to sell it. When you purchase a car, whether outright or with finance, you can sell it to fund your next purchase, keeping in mind that cars depreciate over time.

 

 

Types of Car Leases and Options

There are two main types of car leases in NZ: operating leases and finance leases.

Operating Lease

An operating lease is when you lease a car for a set term, at the end of which you hand the car back to the lessor. This is the most popular type of car lease in New Zealand.

Finance Lease

A finance lease gives you the option to buy the vehicle at the end of the lease period. This lease is structured a little like a loan, with instalments going towards eventual ownership. Finance leases tend to make more sense for businesses than individuals.

Looking for a Great Car Loan?

Why lease a car when you can own a car? At Instant Finance we've been helping Kiwis secure their dream wheels for over 50 years, by providing the funds you need for a car that you can truly call your own.

Apply online today to secure a car loan that works for you.

FAQs

Is it better to buy or lease a car in NZ?

The answer will depend on your circumstances, but buying a car means that the vehicle is truly yours, and you can do whatever you want with it, free from restrictions. And with the help of a car loan, you can secure your dream vehicle.

What is the shortest term to lease a car?

Some NZ car leasing companies offer lease terms as short as 6-12 months, although you will usually face far higher monthly payments when your lease term is so short.

How does leasing a car affect its value?

Leased cars are generally new vehicles, which depreciate (lose value) over time. When you lease a vehicle, you don't have to worry about this depreciation, because you can't sell the car anyway. But you should keep in mind that the lessor will factor the loss of value into the monthly payments that you'll pay.

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