Should I Rent or Lease a Car in Europe?

In yesterday’s post, I pointed out that when renting a car in Europe the exact make and model is almost never guaranteed, only the category such as economy or compact. However, if you lease a vehicle (though “purchase-repurchase” better describes this transaction) from either of two French car manufacturers, Peugeot and Renault, you can specify the exact model and engine type, diesel or gas. Thus, if you want that full-size Peugeot 607 with a diesel engine and the 21-cubic foot trunk, that’s exactly what you will get. There are several other advantages:

• Your leased car will be brand new
• Full insurance is included, no deductibles
• No extra driver charges, no road taxes, no premium station fees
• Drive virtually anywhere in Europe
• Picking up a vehicle in one country, leaving it in another

Sounds great but, as usual, the program doesn’t work for everybody.

There is no additional charge for leased cars delivered in about 25 French cities. But if you want to pick up and/or drop your car elsewhere in Europe there is an extra charge and your choice of location is limited. Outside France the service is available only in the largest cities: Frankfurt and Munich; Milan and Rome, Brussels, London, Zürich, Amsterdam and a few cities in Spain and Portugal. Of course, you can get a car in any of these cities and drop it in another. However, there is no service in such popular destinations as Berlin, Hamburg, Vienna, Salzburg, Prague, Budapest, Florence, and Venice.

The greater concern, though, is price. The lease is not cost-effective for 14 to 30-day European vacations. One simply must stay longer in Europe for it to be competitive with a straight rental. For example, Peugeot’s price for three weeks in a midsize 407 gas engine car is $1449 (add about $80 for diesel). Today the price for a midsize rental car picked up in downtown Paris is $1031. Add another $39 for the extra driver charge and the advantages of the lease don’t justify the $379 difference in price. Even a full month in a rental car in France is $1380 (plus $39 for the extra driver) vs. the Peugeot price of $1692. The lease is even more expensive if you want to pick up in Frankfurt where a midsize rental car for a month (30 days) is only $991 plus road tax of $37. Because of the extra $320 charge for picking up and dropping the car in Frankfurt ($160 each way) the lease under these circumstances is virtually double the price of the rental.

The foregoing rental car prices all assume that you will pay for any rental with a credit card that provides free collision and theft coverage. But once you get beyond the 31-day insurance limit of most credit cards, the lease begins to look more attractive. Six weeks in a Peugeot 407 from Paris is $1988. The rental price for a midsize is $1933 but your credit card probably won’t cover a rental that long (the one except I know is American Express’s special CDW/theft policy which, for $19.95-$24.95 per rental, extends coverage for up to 42 days). If you want to rent, you will either have to do two separate rentals—return the car after the first rental and pick up a second one somewhere in the country of origin—or purchase the additional insurance with a high deductible. In this case, the rental price with insurance $2449 with a deductible of $1290. Here, the lease is clearly the preferred choice and the longer the lease the better.

Another situation where the lease may be your best choice is if you plan to do an international one-way rental involving Italy or Spain. Picking up a rental car in France, Germany, Belgium, the Netherlands, or Switzerland and dropping it in Italy or Spain—and vice versa—can cost anywhere from about $350 to $1500 over and above the rental price.

To summarize: for the most part, leases only begin to make financial sense when they are longer than the period your credit card will cover collision and theft insurance, typically 31 days, or where you will encounter a very high one-way drop fee.

Gemut.com guarantees the lowest lease prices with Peugeot and can knowledgeably assist you in making the decision between a purchase-repurchase and a straight rental. Call Andy at 800-521-6722, or get an online quote.