In normal circumstances, leasing a car has many benefits over the direct purchase of a car, especially for those who are living in Japan on a short-term basis of two-to-three years. As has been written about numerous times by umpteen individuals, the main benefit is to spread the cost through lower monthly payments, offset by a pre-calculated residual value, meaning the user, in theory, only pays for what they use.
In addition to the car itself, it is also common to include the costs of all applicable taxes throughout the lease, periodic maintenance and even in some cases, voluntary insurance into the monthly lease fee.
Sounds simple enough, yes? Pay a pre-determined fee for the pleasure to drive the car of your choice for the period of ones stay in Japan. So, what options are available?
Choosing an Open or Closed Lease
This really depends on whether the lease will be a corporate or personal lease. Open end leases, or finance leases as they are commonly referred to, are no longer available for corporate lessee’s to take advantage of.
The main advantage of an open-ended lease is that the lessee has the option to buy the vehicle upon the completion of the lease for a pre-determined price, agreed by both parties before the lease commences, giving the lessee an increased equity in the vehicle over the term of the lease.
The Downside to Leasing a Car
As is commonly known, the user has no equity in the vehicle under the closed lease system. While this is fine to some, others may decide they wish to own their own vehicle instead, with the possibility to export their car back home under the personal export scheme.
Another point of contention is the monthly/yearly mileage cap included in most contracts. While most companies are fairly lenient about this, using a lease car to travel outside the Kanto plain on a regular basis may not be a good idea.
The biggest issue however, is finding a provider who will lease a car to non-Japanese citizens. While the likes of Sumitomo-Mitsui offer great value on their leases, the lessee signing the contract has to be able to understand the contract independent of any third-party.
Early Termination Costs
By far and away the biggest risk with leasing a car in Japan are the early termination costs. Unfortunately, for those leaving Japan earlier than their stipulated term of agreement, the cancellation fee can be, in some cases, more than the vehicles current residual value.
How is this Calculated
Common practice is to take said car to be examined by an accredited evaluation centre of the lessor’s choice.
While this may not be so exuberant, in the case of a sub-lease, where a leasing company sub-contracts the lease to another lease company, the lessee may find the cancellation fee to be excessive, due to the sub-lessor including their profit margins from the original lease into the cancellation fee.
Regardless of a corporate or personal lease, always make sure you fully understand how the lease works, who is the owner (lessor) of the vehicle, and what penalties, if any, are due if the lease agreement is broken before signing any contracts, to avoid being out-of-pocket to the sum of seven figures or more.