What you need to know about leasing a car for your teenager

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18 Oct 2016 by smartleasing

Handing over car keys to your teenager can be daunting. Not only are you worried about how safe they’ll be on the road, putting them behind the wheel of their own car entails some serious decision-making. If it’s a new car, there are hundreds of models from some 60 brands to think about, a number that rises exponentially if you decide to buy one second-hand.

Many families are tempted to save money with the latter option. But by doing so you won’t always get the car you want. And buying a used car can mean buying into someone else’s problems.

Leasing a car for your teenager is one option that can allow you to get them into a new car for less money up front. You just need to be aware that leasing isn’t for everyone.

Latest and greatest

Leasing may allow you to get a car for your young driver that you otherwise may not have been able to afford. That could mean getting a newer body style that wasn’t available a few years ago, such as a small SUV. There are some great options today, including the Mazda CX-3, Honda HR-V and Suzuki Vitara.

Teenagers hopping into a later model lease vehicle will also appreciate the recent advances in connectivity. Since late 2014 many new cars – various Hyundais and Volkswagens, for example – have been fitted with Apple CarPlay and Android Auto, which allow the control of selected apps through the car’s touchscreen. As well as convenience there’s also the safety element of not being distracted or looking down at your phone.

Perhaps the biggest advantage with getting a newer car is safety, which has moved on enormously in recent years. Curtain airbags are now commonplace, but they weren’t until the last few years. They’re proven life savers in side impacts, so driving a new model will guarantee your teenager has that extra protection. (It also means you’ll have extra peace of mind.) Autonomous emergency braking (AEB), which monitors traffic in front and can automatically apply the brakes, has become more common in later years as well.

Running costs

Forecasting how much a new car will cost to run is a lot easier than with a used car. New cars come with factory warranties of at least three years to take care of faults or failures. Some, including Mitsubishi and Hyundai, have a five-year warranty, and with a new Kia you’ll have seven years’ peace of mind.

In recent years we’ve also seen the emergence of capped price servicing schemes, which set out a pricing schedule to take the guesswork out the maintenance costs of cars. Some brands subsidise the service price for the dealer, making for cheaper services. Toyota, in particular, has among the cheapest servicing these days, with part of the service price effectively built into the price of the car when you buy it.

With a newer car, too, you’ll likely use less fuel. Which is good news for cash-strapped young drivers. According to government figures the average fuel consumption of cars in Australia reduced by 17% between 2007 and 2014, indicative of a trend towards more efficient vehicles.

Use the stickers fitted to the windscreens of all new cars to get an idea of how much fuel it’s likely to use. But also beware of those claimed fuel figures and use them only as a comparative guide – they’re calculated in a laboratory and are typically lower than what you’ll experience in everyday driving.

For parents, there’s also good news because for most people who lease, fuel is GST-free. Not only that, a lease comes with a fuel card, so all fuel purchases are charged back to the account, meaning you or your teenager won’t be scratching around for change to put fuel in the car between paydays.

With a novated lease, all of your running costs including fuel, registration, servicing, insurance, roadside assistance, tyres as well as car finance are packaged into one payment. This can coincide with your fortnightly pay cycle all but eliminating the shock of a big bill. As an added bonus, with a novated lease, running costs are calculated from pre-tax income, further reducing your outlay. 

Looking ahead

Leasing requires some planning ahead because it locks you in to a fixed term contract. With a novated lease the contract also involves your employer, so if your job circumstances are likely to change or you are approaching retirement a lease may not be prudent.

Similarly, if you think your teenager will want to travel the world or no longer use the vehicle in a year or two, you will be the one left with the car and its payments.

As with all contracts there are ways to break the lease, but there could be fees associated.

Adding it up

Most leasing involves interest and other charges, all of which can add up. Ordinary novated leases might give you the GST savings, but you’ll then be liable for fringe benefits tax. At Smartleasing, however, your payments are calculated from a combination of pre and post-tax income to offset the fringe benefits tax liabilities.

In all, deciding whether to lease a car for your teenager is a matter of weighing up all the pros and cons. But it pays to think beyond just new versus used cars and consider the option of leasing a car as well.

Related article: Did you think a new car was out of reach? Three of the best new cars for under $230 a fortnight (and that includes all the running costs!)