Although Germany is well-connected by a comprehensive network of public transport, for some people there is nothing quite like the freedom of driving your own car. If you want to drive but can’t afford to buy a car outright, or don’t want the hassle of importing a car from abroad, leasing a car in Germany could be a good option for getting you to the autobahn sooner rather than later.
Best car leasing companies in Germany
There are a number of different car leasing companies in Germany that offer great deals:
When comparing deals from leasing companies it’s important to take into account the monthly premium (including any additional costs), what’s included, the length of the contract, the types of vehicle available, and the level of customer service.
Car subscription in Germany
If you only need a car for a short period of time, a car subscription might be a better option for you. A car subscription is similar to a long-term car rental, and so offers much greater flexibility than a lease. The subscription is typically much shorter than a lease, and allows you to switch cars. This is a good option if you don’t know how long you will be in Germany.
Car lease Berlin
What is car leasing?
Car leasing allows you to drive a new (or used) car for a fixed period of time, in exchange for a fixed monthly payment, without it being yours. At the end of the lease term you typically give the vehicle back to the leasing company.
Pros of leasing a car
There are quite a few pros to leasing a car in Germany, especially for expats:
Affordable way of owning a car
Rather than having to save up thousands of euros to buy a car outright, leasing enables you to have a car in exchange for a fixed and manageable monthly payment. Sometimes you don’t even need to pay a deposit.
Don’t need to worry about reselling your car
When the lease period ends, you don’t need to deal with selling the car yourself. You simply return it to the leasing company.
Sometimes it’s the cheapest mode of transport
For commuters, leasing a car can be cheaper than using public transport to get to and from work, depending on where you live. It’s also cheaper than a long-term car rental. If you travel regularly, having a car might be more useful than travelling with long-distance trains and buses.
Tax breaks for self-employed people
If you’re self-employed and get the car lease for work, the monthly leasing payments are deductible on your annual tax return. However, these benefits don’t apply if you use the car for personal purposes as well.
Cons of a car lease
Naturally, there are also some notable drawbacks to a car lease:
Tied into financial obligation
When you sign a car lease contract you are entering into a financial obligation that may last several years. Depending on the company you lease from, it may be expensive or even impossible to end your contract early, as most companies will charge a big penalty fee in this circumstance. It’s important to consider this if you are not sure for how long you will remain in Germany.
All car lease arrangements in Germany start with a SCHUFA credit check. If you have a negative credit score, you might find it difficult to set up a lease.
Since you don’t own the car at the end of a lease term, you are not building up any equity in the vehicle.
Many types of car leases in Germany include a kilometre allowance, and charge penalty fees if you exceed this allowance.
Car leasing vs car financing
Car leasing and car financing are two popular ways of funding the use of a car, but they are quite different. While car leasing involves you essentially “borrowing” the car for a period of time for a monthly fee, with car financing, you borrow the money to buy the car outright from a bank or other institution (often the car dealership itself), and pay it back in monthly instalments, plus interest, over a fixed period of time.
Car financing is a popular choice in Germany. According to DAT, more than half of all private car buyers in Germany finance their car. The others either lease the vehicle or buy it with their own money.
Car financing offers some benefits over leasing: the major being that at the end of the contract term the car is yours. However, the monthly loan repayments are often higher than the lease instalments. The contract term also tends to be longer - since you have to repay the entire value of the car - and so you are tied in for a longer time financially.
Buying a car vs leasing
If you’re trying to choose between buying a car and leasing, the right answer will depend entirely on your personal situation. If you have the money or you don’t mind taking out a loan, and you don't want to import a vehicle from abroad, buying a car is a good way to go.
However, if you don’t care about owning the car and you have a smaller budget, you may want to consider leasing as it’s generally cheaper overall. This is because lease companies are able to buy cars on a large scale, giving them a discount on the purchase price.
Types of car lease in Germany
There are two main types of leasing in Germany: mileage leasing and residual value leasing.
With mileage leasing, your monthly payment is calculated based on your expected mileage. When your contract is drawn up, you’ll be asked to estimate how much mileage you expect to do in the car. The higher the expected mileage, the higher the monthly cost of the lease. At the end of the contract, the leasing company will compare your estimated mileage to your actual mileage. If you have exceeded the estimate, you will be asked to pay extra. If you drive less, you might receive some money back.
Residual value leasing
With residual value leasing, the monthly leasing rate is based on how much your car will be worth at the end of the lease period. The value will be stated in your contract. At the end of the lease period, if your car is worth less than what is stated in your contract - for instance due to the market, or because of damage you caused to it - you will have to pay the difference. On the other hand, if it is worth more, you could get some money back.
Private car lease vs business car lease
There is also a difference between private car leasing and business car leasing. If you are self-employed or have started your own business, you can take out a business lease to benefit from some tax advantages.
How to lease a car in Germany
Once you’ve decided you definitely want to lease a car in Germany, it’s a good idea to start comparing providers to get the best deal for your personal situation. When you have a good idea of what you want, you’ll need to make sure that you meet a few requirements.
What are the requirements for leasing a car in Germany?
In order to lease a car in Germany you must:
- Be 18 years or older
- Reside in Germany
- Have a fixed, regular income that covers all fixed costs and other expenses
- Have a permanent employment contract or a fixed-term contract that lasts beyond the expected end date of the car lease contract
- Have a good credit rating (SCHUFA score)
Documents needed to lease a car in Germany
If you want to lease a car in Germany, you need to submit the necessary documents to the leasing company and wait for a decision. Generally, the following documents are required:
- Completed application form and self-disclosure
- ID or passport
- Driving licence
- Residence permit (if applicable)
- Registration certificate (Anmeldebescheinigung)
- Payslips from the last three months
If you have a driving licence from a non-EU country, you will need to exchange your licence for a German one. This may require you to take the theoretical and / or the practical driving test in Germany. Be sure that you also familiarise yourself with German road signs and rules on the autobahn before you start driving.
Car lease: Contract length
Car lease contracts in Germany are usually fixed for anywhere between two and four years, although shorter contract terms of 12 months are becoming more common. Remember that sometimes hefty exit fees apply if you want to give the car back before the contract term is up.
The only exception to this is in the early days of the lease being signed: you can revoke traditional lease agreements and residual value agreements within 14 days. For mileage leases, the 14-day right of cancellation isn’t legally protected, but many providers offer it anyway.
What happens when the car lease ends?
At the end of the lease period, you will return the car to the leasing company and they will inspect it for damage. With mileage leasing, they will also check the mileage and compare this to the estimated mileage in your contract. You may be charged if damage has been done to the car or if the mileage exceeds your estimate.
Once you have returned your car, you may be able to take out another car lease. Some lease contracts also have a purchase option, meaning you can choose to buy the car at the end of your lease period.
How much does a car lease in Germany cost?
The cost of leasing is based on different factors such as the car’s model, brand, features, age and mileage, and can be anywhere from less than 100 euros per month to upwards of 400 euros. You will usually be expected to pay a down payment at the beginning, which can be up to 10 percent of the price of the car. Some companies may offer leasing arrangements without a down payment, but in that case your monthly rate will be higher.
Be careful when selecting a lease deal to pay attention to additional costs. Sometimes a cheap monthly rate can mask huge hidden costs, landing you with a big bill at the end of your lease term. It’s important to carefully consider what is and isn’t included in the leasing rate, to make sure you’re getting the best deal.
Car leasing in Germany: What is included?
The monthly fee you pay to the car leasing company usually includes:
- Full use of the car for the term specified in your contract
- Delivery and transfer costs
What is excluded?
Unless otherwise stated by your provider, most leasing rates in Germany do not include:
- Car insurance (comprehensive insurance is usually required)
- Vehicle registration
- Vehicle taxes
- Service and maintenance costs
- TÜV (roadworthiness) inspections
However, some companies offer to include these services in the lease rate for an additional monthly fee.
It’s also worth noting that, in the event of damage or maintenance issues, you are usually required to have a leased vehicle repaired at an authorised or partner workshop of the manufacturer, rather than being able to freely choose your own garage. Your contract will state explicitly if this applies to you.
You will also have to cover some other costs associated with owning a car and driving, for instance, refuelling, traffic fines, parking costs and car wash visits.
Used car leasing in Germany
Car leasing companies don’t only offer new cars; it’s also possible to lease a used car in Germany.
Benefits of leasing a used car
There are some clear advantages to leasing a second-hand car rather than a brand new one:
- Availability: Often, you will receive your “new” car within three weeks.
- Flexibility: It’s generally possible to get a shorter lease contract (from 12 months).
- Budget: Second-hand cars are generally cheaper to lease than new ones.
Drawbacks of a used car lease
On the downside, however, you need to consider:
- Age: A used car may be older than you would like, especially if you are someone who prefers to drive newer models.
- Higher monthly premium: If you do decide on a shorter lease contract, you will often pay a bit more per month.
- Signs of use: While the second-hand car will be thoroughly prepped before it’s offered again, small signs of use may still be present.
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