Leasing Explained

Overview Of Car Leasing

Think of leasing like renting a car, but for longer than a quick holiday in Spain.
When you rent a car on holiday, you pay a set price per day depending on how fancy the car is. When you’re done sunburning yourself, you hand the car back and that’s that.

Leasing works the same way. You pay a fixed monthly amount to drive a brand-new car for a set time, usually two to four years. When your lease is up, you give the car back. No messing about trying to sell it, no worrying what it’s worth. Just hand over the keys and walk away. Simple.

There’s no option to buy the car at the end, leasing is all about using it, not owning it.
You might see leasing called personal contract hire (PCH) or business contract hire (BCH). That’s just fancy talk for whether you’re doing it as yourself or through your business. Same idea, same easy hand-back when you’re done.

How Car Leasing Works

When you lease a car (usually a shiny new one) the total cost is split into simple monthly payments. The contract can last for different lengths, but most people choose between two and four years.

Most leases start with an upfront payment in the first month, unless you pick a No Deposit option. After that, you pay the same fixed amount each month until your contract ends.

You might see deals shown like ‘9 + 35’, this just means you pay the equivalent of nine months upfront, then 35 monthly payments after that. So, you’re driving the car for 36 months in total.

There’s loads of choice when you lease. Pick the make, model and extras you want. Your contract is then tailored to that car, your mileage, how long you want it for and how you prefer to spread the payments. It’s flexible and simple.

The cost also depends on what the car is worth at the end — this is called the residual value. If the car keeps its value well, your payments are usually lower.

Benefits of Leasing a Car

If you want to drive a brand-new car, leasing is often one of the cheapest ways to do it. This is especially true for more expensive models that cost a fortune to buy outright. That’s why so many people choose leasing instead of buying.

It’s perfect if you like changing cars often. Swap to a new model every few years without worrying about selling your old one. No stress about how much it’s worth — just hand it back when you’re done.

Since you’re driving a new car for a short time, it’s usually still covered by the manufacturer’s warranty. If anything goes wrong, you shouldn’t have to pay extra.

Many leases include road tax, breakdown cover and sometimes servicing. If they don’t, you can usually add a maintenance pack to keep things easy.

Best of all, leasing is straightforward. You know exactly what you’re paying each month, there are no hidden surprises, and you simply hand the car back when your deal ends.

Things to Keep in Mind

Leasing has lots of benefits, but it’s not for everyone. If you want to keep the same car for years and years, buying or a different finance option might be better.

It can also be less flexible than some finance plans. For example, with PCP you might be able to end the agreement early once you’ve paid off half, but leasing doesn’t work like that.

And remember, you don’t own the car. The finance company does. If owning the car outright is important to you, leasing won’t always be the right fit. (sometimes they do let you purchase it)

Returning Your Vehicle

When your lease ends, there are a few things to check.

Your contract will include a mileage limit. If you go over it, you’ll usually pay an excess mileage charge per mile.

Your car should be in good condition for its age and mileage. Normal wear and tear is fine, scratches and scuffs happen, but anything more could mean extra charges.

To see exactly what counts as fair, check out our BVRLA Fair Wear and Tear Guide.

Other Considerations When Leasing A Car

There are some other things to be aware of when you lease a car:

• Cars are usually delivered free to your address in the UK.
• The warranty only covers unexpected failures, and you should still service it in line with the recommendations from the manufacturer.
• Road tax is usually included in the cost of the lease agreement.
• You will need to get your car insured fully comprehensive just like any other vehicle.
• If you arrange for a longer leasing period, this usually leads to lower monthly payments.

You may be able to get a no-deposit lease where all the monthly payments are the same amount, including the first payment.