Advantages and disadvantages of the LOA: leasing with purchase option

You had a crush on a new car? Certainly, some models are out of price. However, to finance the purchase, you can opt for a lease with purchase option. But what's that? Is it an advantageous solution?

The LOA: how does it work?

Lease with purchase option is a kind of leasing, an offer proposed by car dealers or brokers. It can concern any model and category of car. The principle is very simple. You choose a car from the provider's range. Then, at the signature of the contract, you pay an initial contribution representing 15% of the value of the vehicle at most. Then, you pay the monthly installments during the period provided for in the contract, from 24 to 60 months. At the end of the contract, you would have to exercise the purchase option to become the owner of the vehicle. In any case, to find the best offer, you should not hesitate to make a simulation before making a commitment.

What are the advantages of leasing with purchase option?

The LOA makes it possible to drive a new car with a minimal initial investment. This is one of the biggest advantages of this solution. In addition, the monthly payments are reduced compared to the terms of a car loan. You can use the car for a specific period without worrying about anything. Yes, maintenance costs are included in the lease payments. Also, at the end of the contract, if you don't like the vehicle, you can change it without constraint. So you don't have to exercise the purchase option. If you've got your eye on a new model, there's nothing to stop you from signing a new contract. So you don't have to worry about reselling the previous car. Finally, the vehicle cannot be seized, since it does not belong to you.

And what are the disadvantages of the LOA?

Despite the various advantages of LOA leasing, this solution also has its drawbacks. If you do the calculations, it can be deduced that the car will cost you more. Also, you must take out a good insurance policy to protect the car. In addition to the compulsory third party liability insurance, it is better to add other guarantees for optimal protection, such as theft and fire insurance. In addition, dealers impose a limited number of kilometres per month or per year. If you exceed this limit, penalties for additional kilometres will cost you a lot of money. And finally, you must return a vehicle in perfect condition. This is not always easy. At the end of the lease, you should therefore foresee a reconditioning fee.