Joanna Ratcliffe
01 May 2023
A question we often hear is if my car is delayed, can I extend my Lease Contract?
In the current climate of car delays there are options to extend your existing personal or business contract hire agreement. We’ll talk you through options open to you if you need to extend, detailing the different forms of extension involved. It will also look at the pro’s and con’s of extending.
As the name suggests, a lease extension is an agreement with yourselves and the finance company to extend the length of your business or personal contract past the official termination date agreed at the start of contract. Most Finance companies will offer 2 types of extension: Formal and Informal Extension.
What is an Informal Lease Extension?
An informal extension is an agreement of extension with your finance company that does not tie you into a set time frame. It will allow you to extend your contract up to a certain date and give you the flexibility to return the car at any time before that date and only pay for the days used. The monthly payment may change dependant on the finance companies’ informal extension conditions. For example, if you paid a 3 month or more initial first payment, this deduction from the monthly payments will no longer be taken into account. It is also worth noting that the set contract mileage will continue on a pro rata basis. This kind of extension is a helpful solution if you only have a brief period of time to fill before your new vehicle can be delivered. Not all Finance Companies will offer this option so you would need to check if it is available to you with either the P+B Client Services team on 0131 285 1039 / clientservices@pikeandbambridge.co.uk or directly with your Finance Provider.
What is an Formal Lease Extension?
A Formal Extension is a formal agreement between yourself and the finance company. This agreement will tie you into an agreed period past your contract end date, normally for either 6, 9 or 12 months. An amended agreement will be shared with you, detailing a set monthly fee, mileage and end date. Your mileage at this stage can be changed up or down to take into account what you think your end mileage is going to be, this will of course affect the monthly payment going forward. If agreed to, you will be tied in to pay for this full term and would be charged early termination fees if you wanted to hand back early. Most funders will offer this form of extension and it would only be suitable if your new car is delayed for a longer period of time or you want to push back committing to a new agreement.
Servicing, Tyres, MOTs and Warranty during a lease extension
With both forms of extension, once you are past 3 years, an MOT will need to be carried out. If you hold a maintained contract, the finance company may cover this cost but you will need to arrange the booking. It is also worth noting that servicing and new tyres will need to be completed if due within the extension period. You will need to check the length of your manufacturer’s warranty on your vehicle as most warranties will only run for 3 years so if you are on a non-maintained contract, you may need to consider an extended warranty.
Both extension options would need to be discussed and agreed directly with your Finance Provider. Your monthly payment can be affected with both formal and informal extensions, so it is worth finding out costs for both options when looking to make an extension decision. At P+B, we can advise you on what options are available to you with your finance provider and give our expert opinion on what the best way forward would be.
Pros & Cons of extending your car lease:
Pros
• It will give you more time if you are waiting on a delayed vehicle, making sure you are not without vehicle.
• You can amend your contract mileage and maintenance package.
Cons
• Your monthly payment could increase.
• Finance companies may charge administration fees for extending
• If you go for a formal extension, you will need to sign up for a new agreement with the finance company.
• If you go for an informal extension, the lease company can request the vehicle back at any time, leaving you without a vehicle to drive.
• Pricing on vehicles is increasing so extending your current contract will mean increased prices on a replacement contract in the future.
• If you are on a non-maintained contract, your warranty may have run out, an MOT could be due and on-going maintenance costs could increase.
Please contact the Client Services Team for more details.
