Lease Cars and Warranties

Car leasing is now the most desireable routes of vehicle procurement / finance, contract hire and leasing has become a hotly debated and discussed topic in car forums... Given the volume of conjecture, it is sometimes very difficult to obtain the correct information on the product. One of the topics which seems to arise frequently is the question of a vehicle warranty and how this applies to you when you lease a vehicle.

Do I need a warranty if leasing a car?

The first, and most important point, to note is that contract hire is a usership-style product. The vehicle is not registered in the name of the driver (personal or business); it is registered in the name of the finance company. The V5/log book will never be made available to the customer. So, fundamentally, the responsibility for the vehicle always exists with the finance company BUT while a driver operates (uses) the vehicle, they should treat it responsibly and if it was their own vehicle. However, this demonstrates how contract hire is such a great tool, in that it allows you to operate vehicles while they are in within a warranty period and simply return them to the finance company at the end of the contract without disposal concerns.

The second, and more detailed point, is that a contract hire vehicle, like a purchased vehicle, will benefit from any warranty which is offered by the manufacturer. Every new (and used) car on sale in the UK has to be a supplied with a warranty on the vehicle and this will be based on a certain length of time and/or mileage. The actual content of a warranty will vary from manufacturer to manufacturer but is commonly 3 years or 60,000 miles. Some manufacturers are encouraging customers to buy their product by offering extended 5/7 year warranties (this is relevant for any longer-term leasing customers).

What is covered & what isn't covered by a warranty?

So, what actually is a car warranty? In essence, a warranty exists to protect a customer against defects, whether mechanical or electrical, on car which are not the fault of the customer. For the customer who adheres to the service schedules, changes the tyres with the correct size/rating and fuels the car correctly, they should essentially be offered comprehensive comfort from the manufacturer that any issues will be remediated by a franchised-dealer/manufacturer representative.

A brand-new car warranty does not cover you for routing servicing, tyre changes or breakdown recovery. These are aspects of maintenance and are only included within a contract hire arrangement when the customer selects a “funder-maintained” agreement. As we work alongside a number of finance companies, it is important to note that the exact terms of each agreement will be slightly different i.e. some cover puncture of tyres, some include breakdown recovery and others offer mobile servicing/tyre fitting services. However, at the core is an agreement to maintain the vehicle other than interim oil/coolant/water additions. Whether or not you a choose driver-maintained or funder-maintained agreement, the point to note is that it is your responsibility to organise the maintenance in accordance with the manufacturer recommendations. If you do not do this properly, you risk the warranty being invalidated.

When does a warranty on a lease car begin?

When you take a new-car, you also need to identify when the car was registered. The reason for this is that when a car is registered and receives an AFRL, the time period for the warranty begins. In the leasing industry, many vehicles are supplied on a “pre-registered” basis which means that they are often 1-3 months old before you receive them. This does not mean that the car has been driven or used in any way but that in order to secure a certain level of discount /support, a vehicle is registered. Before you receive your vehicle, the credit broker/dealer/finance company will identify to you the date of registration so that you can accurately calculate your residual warranty period. For customers who are risk averse, consider a contract term which fall within the warranty period i.e. 24 or 30 months or utilise a funder-maintained agreement. In the case of the latter, this offers some of the key features you get from a warranty.

HELP - My lease car has developed a fault - what are my options?

Unfortunately, as new cars are highly-complicated electrical and mechanical machines, they do occasionally break. If your lease car does have an issue, in that the vehicle does not start or operate properly, you will need to arrange the vehicle to be recovered. Some brand-new cars are covered by breakdown assistance for the 1^st year (some manufacturers offer 3 or 4 year breakdown recovery), so if the issue happens in the first 12 months you have some comfort. Outside of that time period, it is your responsibility to organise the recovery. The recovery agent (commonly the AA, RAC or Green Flag) will be able to re-locate you to the local franchised-dealer, where the issue can be analysed and remediated. While your vehicle is “off-road” please note that there is no legal right to receive a courtesy vehicle nor is there some industry standard saying you should get one. While your lease vehicle remains with the dealer, if they cannot provide you with a courtesy car, you may have to organise your own transport. The only way in which you can protect against this (which is important for “Business Critical” customers) is to include a relief vehicle within the contract. A relief vehicle, which is an additional cost, guarantees you a vehicle for a certain time period (often 28 days) so that if your vehicle is “off-road” you are effectively covered with a mode of transport. Outside of this, you may have to rent a vehicle or appeal to the good-nature of the dealer.

Can I Reject & Return a Lease Car with a Warranty Issue

If you have an issue with a car, can you reject the goods under a warranty? A “problem” vehicle creates issues for the driver, manufacturer and finance company alike. Rather than the warranty, your ability to reject a car is controlled by the Consumer Credit Act, which came into force in October 2015. For anything goods which are not of satisfactory quality, fit for purpose or as described, a customer may be able to enforce a rejection. For a new car, this would a “30-day” right to reject the goods following receipt (you can reject for any issues noted within the first 30-days). Once you are out of the 30-days, you still have rights to reject the goods if you discover an issue within the first 6-months and the manufacturer/dealer cannot repair it. However, a supplier/finance company may be entitled to a reasonable reduction for any use you have had with the vehicle. In the long-term, rejecting a motor vehicle is possible but is a difficult and timely procedure. For a vehicle with a long-list of historic issues, you may be entitled to return the goods BUT this will not the be the first resort.

For more info on car leasing check out the other article in our Help and Advice pages or stay tuned to our motoring blog for lease car reviews, updates and industry news...You can also speak to our team about any issues you might be facing with your leased vehicle.