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Car leasing is an alternative to purchasing a car and involves leasing the car over a set period of time. Car leasing is mostly used by business users as a very cost-effective method of having the use of a car without a large cash outlay. The major difference with car leasing over a car purchase is that at the end of the term, which is normally between 2 and 4 years, the car is given back to the car leasing company for them to sell. Car leasing gives advantages for both car seller and buyer. Car leasing payments tend to be lower than that which would be expected when buying a car through a car loan and often the qualifications required to get a car lease are easier than obtaining a car loan. Many people prefer car leasing because it means that at the end of the car leasing period, the car can be exchanged for a new model without all the hassle of selling the car and taking a loss because of depreciation. The driver gets to run a relatively new car all the time and has no worry about the falling value of the car when car leasing. For the seller, car leasing provides an income from the car whilst they still own it and when the lease period is over, they can either lease it again or sell it once the car leasing period is finished. For businesses, car leasing works well by generating repeat customers more easily than with a car sale. Car leasing contracts will often involve a fee if the car lease is ended prematurely, before the end of the full lease period. Very often there is also a limit to the amount of miles that the car can drive, usually around the 12,000 miles per year mark. Again, if this limit is exceeded a fee is charged, depending upon the amount of extra miles covered. Alternatively, car leasing contracts can be negotiated for a higher monthly lease payment in exchange for a higher annual mileage than standard. Another factor to be taken into consideration when car leasing, is the amount of wear and tear on the car, a certain amount is allowable under the standard lease but if this is exceeded, a further fee can be applied. Car leasing can be arranged with maintenance, which is also known as Contract Hire. This form of car leasing can include all the running costs, including vehicle excise duty and routine servicing and repairs. This form of car leasing does not include fuel and insurance, however. Car leasing payments are worked out much in the same way as car loan payments. When the car leasing contract period expires, the person leasing the car must return the car to the owner or in some cases they will have the option to buy it. This end of lease price is usually agreed from the start of the car leasing period, giving the person leasing the car the opportunity to save for the final purchase price during the car leasing period, should they wish to do so. So, if you happen to be in the market for a new car, it might be that car leasing is the best way forward for you, it is almost always the most cost-effective method of financing a new car. Many people can be put off car leasing despite the very clear cost benefits, this is because they believe that car leasing is complex and buying a car outright is a lot simpler. This is not really the case, car leasing is relatively straight forward and it brings with it many advantages. If you decide to try car leasing, the process is similar to the one involved in buying a car. You go along to a car leasing showroom and pick out your model, the same as you would normally do. People often believe that car leasing limits the choice of the type of car that they can have, but this is not the case. Very often, a car leasing company will have a far wider choice of cars than most traditional car dealers. The initial price of the car forms the basis of the lease cost, which is worked out for you, depending upon the length of the car leasing term. The residual value of the car is then calculated, this is the value of the car at the end of the car leasing term. This residual value is normally around 50% after a 3 year car lease. Your payments throughout the car leasing period are worked out on the difference between the residual value and the new price of the car. So basically, the higher the residual price, the cheaper your car lease will be. Factors such as mileage, wear and tear etc. all affect the residual value. The initial down payment on the car is very often considerably lower when car leasing, when compared to buying a car outright with a finance package, so you don't need to raise a large amount of capital initially. Usually, this figure represents the equivalent of three months worth of lease payments. Don't forget though, that if you exceed the mileage specified during the car leasing period, this will effect the residual value of the car and therefore the car leasing company will levy an additional charge upon you. Similarly, if the wear and tear on the car is greater than the standard set out at the beginning of the car leasing period, you will also be charged extra. However, you will have the opportunity to buy the car with some car leases and in any event, you can hand the car back at the end and get another new one. Car leasing is not for everyone, but if you like to drive a new car and don't want to worry about depreciation, it might be for you, after all, when you are car leasing, you're saving money against the cost of buying a new car every 3 years or so.