The Fixer: Should I lease a car?

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Dear Fixer,
I am selling my old car to my sister and want to buy a new Peugeot 208 to replace it.

I have been offered a leasing deal called Just Add Fuel that means I pay £249 for 35 months, on top of a deposit of £1,837, but all my other costs - such as insurance and tax - are covered.

At the end of the contract, I can then decide whether or not to buy the car for a further lump sum payment of about £6,000.

I like the idea of not having to worry about running costs, but I have never leased a car before and I am a bit worried about missing out on a better option.

Is leasing a good way to get a new car? Thanks for your help.

M Stewart, Brighton

Dear Miss Stewart,

Leasing agreements are basically long-term rental contracts with which you pay a monthly fee to use a car for an agreed period.

They are popular with those keen to drive a brand new car without paying for it upfront. However, you will have to stick to a certain mileage; in the deal you are looking at this seems to be set at no more than 6,667 miles per year.

Deals of this kind also come with a range of other penalties and extra charges, making it very important to check the terms and conditions carefully before signing up. And if you fall behind on your payments the car will be taken away.

As this model costs less than £15,000, it is therefore worth considering taking out a low-cost personal loan to finance the purchase.

Lenders such as Sainsbury's Bank and Derbyshire building society are currently charging around 5% on three-year loans of up to £15,000.

But the main difference is that you will own the car at the end of the term, without having to make another big payment.

You can also sell a car to pay off a personal loan should you become unable to keep up with the repayments - although to avoid this it is a good idea to do your sums first, remembering to add insurance and tax costs to the payments to get a total.

The Fixer

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