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Explainer: leasing and car finance deals in France

Leasing, rather than buying a new car outright, is popular in France, and can offer both convenience and good value. We steer you through the process

Over the past 10 years, the popularity of leasing with an option to buy has increased from 10% of the market to around 33% Pic: Perry Taylor

Some lucky drivers have enough money saved up to pay cash for new cars, but most people rely on finance deals.

Over the past 10 years, the popularity of leasing with an option to buy has increased from 10% of the market to around 33%, according to figures from the Association française des sociétés financières (AFSF).

Extraordinarily, in June 2020, when France came out of the first strict lockdown, 230,000 new vehicles were sold – 80% of them through hire purchase schemes (location avec option d’achat, or LOA).

LOA is increasingly being used to buy second hand cars as well, according to AFSF.

The reason for its popularity is that banks, under tighter regulation since the 2007 financial crisis, have found they can get away with tying up fewer reserves against loans if they offer leasing packages instead of straight car loans.

To attract customers, monthly payments are usually less than traditional car loans too, and occasional special offers, usually on cheaper cars, appear where no lump sum is required at the start.

The process is usually straightforward – once you have agreed on a car and the price, the salesperson will explain the package to you. For LOA deals, this normally involves putting down a deposit of €2,000-€10,000 – up to 15% of the price of the vehicle – then leasing for a monthly sum for two to four years.

There is a 14-day cooling-off period, in which you can cancel if you change your mind.

The monthly sum owed will depend, of course, on the price of the car, the size of the deposit and the length of the loan.

Sometimes, the first payment is much higher than the rest (instead of, or on top of, the initial deposit).

At the end of the period, you can return the car and start again in a new vehicle, with the leasing period and monthly payments recalculated.

Pure rental agreements are known as a location de longue durée (LLD). The monthly payments are often less than for a LOA but, apart from this, the big advantage is that servicing is usually included, as well as repairs and a replacement car if required.

Some sort of breakdown cover, usually involving the vehicle brand’s network of garages, is also included, and insurance is sometimes part of the package too.

Alternatively, at the end of an LOA leasing period you pay out a lump sum, calculated on the rents you have already paid on the vehicle, the deposit at the start, and the price of the vehicle, and the car is yours.The amount is decided when you take out the LOA contract.

Banks can usually provide a traditional car loan for two years to buy an LOA car if you do not have the money to hand for this lump sum at the end.

Keeping the vehicle longer than the option period as a rental vehicle under the same contract is often not a good idea as rents will typically rise steeply after this.

Details of every monthly payment are given in the contract.

Unlike with an LLD, under LOA contracts, keeping the car serviced is typically the responsibility of the driver, though this depends on the contract. 

On all leasing schemes there is often a limit on the annual number of kilometres driven – 20,000km is common, although penalties for slight overruns are small.

With LOA, insurance almost always remains the renter’s responsibility.

Most contracts stipulate it must cover the cost of bodywork repairs to a new standard or, if the car is declared a write-off, the new price of the vehicle.

Some LOA contracts include an option d’achat avant terme (option to buy before the contract term is up), but usually you need to rent the car for at least a year.

Although an LOA will typically end up a little more costly than a traditional car purchase loan, it has advantages, especially for motorists on a tight budget.

The initial deposit is usually less, and as your monthly payments are only going towards paying off part of the car’s price (the rest being its residual value at the end), they are reduced compared to loan payments against the whole value of the car.

The vehicle’s carte grise registration document gives the bank or finance house as the owner, with the driver’s name on it for speeding and other penalties.

If you buy the vehicle at the end of the LOA period, then the carte grise is transferred to your name.

For people who like driving new cars, the advantages of leasing are obvious. You get a new car without the hassle of selling the old one every two or three years, and your motoring expenses are unlikely to have any nasty surprises.

A big plus for people who keep cars for a long time is that buying an LOA vehicle you rented from new means you have the full history of the car and its drivers.

A drawback for some people is that they know the car is not properly ‘theirs’ until the lump sum has been paid off.

Another thing to look out for  is that if sales staff know you will be going for a loan package, they may steer you towards more expensive vehicles in the range, adjusting the monthly payments by extending the length of the loan, and not offer you significant discounts on the price of the car.

For this reason, it is always a good idea to agree on a price first, and only then talk about finance deals.

With global supply issues causing a shortage of new vehicles, dealerships are reportedly being tougher on buyers this year, with some refusing all discount negotiations. 

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