In Switzerland, leasing has become one of the main methods of financing a new or used vehicle. Depending on the offer, a deposit is sometimes required to finalise the contract. Although this allows the amount of the lease payments to be adjusted, the deposit is not recoverable at the end of the contract.
The different leasing solutions
Apart from the cash purchase, which sometimes requires a significant investment, or the classic credit which allows you to finance your vehicle in its entirety, there are other solutions for acquiring a car, generally new or very recent, in return for a monthly rent. This is known as car leasing.
The main alternative to the classic purchase is leasing. Other services, such as maintenance or even insurance, can be included in a single monthly payment. Leasing generally allows you to drive a new car with lower monthly payments than with a conventional loan, since only the use of the car is financed. Depending on the formula chosen, the vehicle is returned without any other alternative (pure leasing). In the case of a lease with trade-in value, the subscriber will have the choice of returning the vehicle or purchasing it at the end of the leasing. Depending on the financial institution or the type of vehicle, a down payment may be required to take out a residual value lease.
The impact of the deposit on future lease payments
In the case of leasing, the down payment constitutes an increased first rent. It can be paid by the subscriber with the necessary funds, or it can be the trade-in amount of a previous vehicle. Although it is not always compulsory, for some people it can represent an opportunity to reduce the amount of future rents and thus preserve their budget. The deposit can also be a solution that allows the lessee to include services such as maintenance or full comprehensive insurance in the monthly payment, without increasing the initial rent.
Car leasing with no deposit : What happens at the end of the contract ?
Things are different depending on the formula you choose. In the case of a pure rental leasing contract, no acquisition is possible and the vehicle must be returned at the end of the contract. In the case of leasing with a purchase option, the lessee will have the choice between two solutions at the end of the contract. They can return the vehicle if they do not wish to keep it, or they can purchase it for the residual value. It is at this point that the contribution becomes interesting, as it will be deducted from the final amount. A down payment only becomes advantageous if the lessee wishes to keep the vehicle at the end of the contract. In other cases, even if it reduces the amount of the monthly payments, it is lost.
Are there any additional costs to pay at the end of the contract ?
It should be remembered that when you decide to finance your vehicle by leasing, you are not the owner of your vehicle, unlike a cash purchase. Only leasing with a purchase option allows you to become the owner of your vehicle at the end of the contract to avoid certain surprises at the time of return. If you exceed the initially defined mileage or return a vehicle that needs to be repaired, you will be charged penalties. Indeed, it is not uncommon to have to pay money just to return a leased vehicle if it has not been used in optimal conditions.
When deciding to finance a leased vehicle, it is important to bear in mind that you do not own the vehicle. A deposit is only worthwhile if you know in advance that you want to keep your vehicle at the end of the contract (leasing with an option to buy) because the deposit is never recovered. If you are a heavy driver and not very careful, it is better to opt for a traditional purchase to avoid certain penalties when you return your vehicle.
