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 guide explains how car leasing works in NZ, who actually leases to individuals, what to watch out for, and how a lease compares with buying a car with a loan.
A lease means paying to use a car you don't own. At the end of the term, you usually hand it back.
Personal leasing is fairly uncommon in NZ. Only a handful of companies lease cars to individuals. Most leasing is for businesses.
Leases come with conditions, like kilometre limits and charges for wear and tear, and ending early can be costly.
A car loan means you own the car, so you can sell it, keep it, or drive as far as you like.
Rates for an Instant Finance car loan range from 9.95% to 29.95% p.a., depending on your circumstances.
Leasing is a way to drive a car without buying it, so you don't need the funds to purchase one outright. Here's how car leasing works in NZ.
A vehicle lease is a contract that lets you use a car for a set period, usually around 2 to 5 years. During this time, the leasing company (the lessor) owns the car, and you (the lessee) pay a regular fee to use it.
Depending on the lease, the payments can cover some of the costs of running a vehicle, like servicing and maintenance. At the end of the lease, you usually return the car to the leasing company.
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 newer vehicles: Lessors usually offer new (or nearly new) vehicles, so you'll often be driving a recent model.
Less of a commitment at the end: When the term is up, you simply hand the car back.
Less responsibility for maintenance: Depending on the lease, the leasing company may cover some or all of the servicing and maintenance.
No worrying about resale value: When you buy a vehicle, it loses value over time. When you lease, the leasing company carries that risk, though it's built into your payments.
But there are also some important drawbacks to leasing, which is why many people take out a car loan instead. These include:
Kilometre limits: You usually have a set number of kilometres you're allowed to drive, with charges if you go over.
Wear and tear charges: You may face refurbishment charges if the vehicle has more than normal wear and tear at the end of the lease.
No ownership: While lease payments can be lower than loan repayments, when you buy a car you can sell it. When you lease a car, you hand it back at the end of the term.
Insurance: Leasing companies usually require comprehensive insurance, and sometimes extra cover on top.
Ending early can be costly: Getting out of a lease before the term is up often comes with fees.
Yes, but your options are more limited than in countries like Australia or the US, where personal leasing is common.
In New Zealand, most vehicle leasing is set up for businesses, and only a handful of companies lease cars to individuals.
These include Driveline, Flexi Lease, Honda Leasing and Lease Direct, with terms ranging from 6 months to around 5 years depending on the provider and vehicle.
Some employers also offer car leases as a work benefit. If yours does, ask about the costs and any tax implications before you sign up.
If you don't need a brand-new car, or you'd like to own your car at the end, buying with a car loan may suit you better. More on that below.
You may see "long-term rental" or "rent-to-own" car deals advertised, sometimes with no credit checks.
These work differently from a traditional lease, so before you sign up, check the total cost over the whole term, what's included, and whether you'll own the car at the end.
As a general rule, the shorter the lease term, the higher the payments. A longer term usually means lower payments, but you're committed for longer, and ending a lease early can be expensive.
Choose a term that fits how long you expect to need the car.
There are two main types of lessors in NZ: car dealerships and dedicated leasing companies.
Leasing through a dealership can mean dealing directly with the brand that makes the car, which can service and maintain it too. A leasing company may offer more choice across makes and models.
Compare the total cost and what's included either way.
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.
When you lease a vehicle you need to be careful to follow the rules of the lease. Before you get driving, check the following:
Kilometre limits: 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 or late return fees, damage charges and more.
Maintenance: Check who is responsible for what in terms of vehicle maintenance and servicing during the lease term.
There are two main types of car lease in NZ.
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.
A finance lease is structured more like a loan. Your payments go towards the car, and at the end of the term there's usually a final payment (a residual) if you want to keep it.
Finance leases are mostly used by businesses.
Good to know: In New Zealand, a lease of a car that's mainly for personal use can be treated as a consumer credit contract under the Credit Contracts and Consumer Finance Act, the same as hire purchase.
That means the leasing company has the same responsible lending obligations as any other lender.
|
Car Lease |
Car Loan |
|
|
Who owns the car |
The leasing company |
You |
|
At the end of the Term |
Hand it back (or pay a final amount to keep it, on some leases) |
It's yours to keep or sell |
|
KM Limits |
Usually, with charges if you go over |
None |
|
Wear & Tear |
Charges for excess wear and tear |
No charges, but impacts resale value |
|
Upfront costs |
Usually low |
Can be nothing, with no deposit required |
|
Maintenance |
Sometimes included |
Up to you |
|
Total Cost |
Your payments, and you own nothing at the end |
Your repayments, minus what the car is worth when you're done |
|
New or Used Cars |
Mostly New |
New or used, from a dealer or a private sale |
Here's an illustrative example for a $30,000 new car over four years.
Leasing (estimate): based on typical NZ lease assumptions (a 9.5% finance rate and the car being worth 30% of its price after four years), a lease could cost around $592 a month, or about $28,400 over four years.
At the end, you hand the car back.
Buying with a car loan: if you're offered 12.95% p.a. over four years, your repayments would be $813.18 a month, or $39,032.64 in total on monthly repayments, including interest and fees.
At the end, you own the car. If it's worth about $9,000 (30% of its price), your real cost is about $30,030.
So which comes out ahead?
In this example, the two end up fairly close.
The lease is a little cheaper on paper, but it comes with kilometre limits, wear and tear charges and costs if you end it early, and you hand the car back.
With the loan, you can drive as far as you like, sell the car whenever you want, and keep it once it's paid off.
Every lease and loan is different. Lease costs depend on the car, kilometres and what's included, and Instant Finance rates range from 9.95% to 29.95% p.a. depending on your circumstances. Try your own numbers in our loan calculator.
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 with finance. Which is the best option for you?
Consider the following:
Leases can make budgeting simple, as many of the costs of running a vehicle are rolled into one regular payment.
The same could be said for a car loan, but you'll need to allow for maintenance and servicing costs separately.
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.
When you lease a car, you don't own it, so you can't sell it.
When you buy a car, whether outright or with finance, you can sell it to fund your next purchase, keeping in mind that cars lose value over time.
With a lease, upgrading usually means waiting until the end of your term, or paying to exit early.
With a car loan from Instant Finance, you don't have to pay off your loan to change cars.
As long as the new car is worth the same or more, your loan can usually move across to it (a contract variation fee applies, and there may be PPSR fees too).
If the new car costs more, you may be able to top up your loan, as long as the extra repayments fit your budget.
Find out more about selling a car with finance owing.
If owning your car appeals, a car loan lets you buy new or used, from a dealer or privately, with no kilometre limits. Our car loansCar Loan range from $500 to $50,000, with rates from 9.95% to 29.95% p.a. depending on your circumstances.
Not sure which type of loan suits? Compare a car loan vs a personal loan, read our tips on how to buy a car, or see our guide to how to finance a car in NZ.
We won't let you get in over your head: we'll go through your budget with you to make sure the repayments fit.
Terms and conditions, and responsible lending criteria apply.
It depends on what you need. Leasing can suit you if you want a new car with low upfront costs and you're happy to hand it back at the end. But personal leasing is fairly limited in New Zealand, and you won't own anything at the end of the lease. If you'd like to own your car, drive as far as you like, or buy used, a car loan may suit you better.
It depends on the leasing company, the term, the kilometres and what's included. As a rough estimate, using typical NZ lease assumptions, a four-year lease on a $30,000 new car could cost around $590 a month. Always compare the total cost over the whole lease, not just the monthly payment.
You don't own the car at the end, so you have nothing to show for your payments once you hand it back. Kilometre limits, wear and tear charges, and the cost of ending a lease early can also add up.
It's a rule of thumb used overseas, mainly in the US and UK: a lease may be good value if the monthly payment is no more than 1.5% of the car's list price. For a $30,000 car, that would be $450 a month or less. It's only a rough guide, and NZ lease prices often work out higher, so compare the total cost of the lease instead.
Some NZ leasing companies offer terms as short as 6 months, though shorter leases usually come with much higher monthly payments. Most leases are for new or nearly new cars. If you're after a used car, buying it with a car loan is usually the simpler option.
Leased cars are generally new vehicles, which lose value over time. When you lease a vehicle, you don't carry that loss directly, because you don't own the car. But the leasing company builds that loss of value into your payments.
