What is Car Leasing?

A Comprehensive Guide to Leasing

Found your perfect family car but don’t have the savings set aside to buy it outright? Thankfully, you don’t have to say goodbye to the perfect family vehicle. Car leasing is here to make getting behind the wheel even easier. 

Never leased before? In this guide, we cover everything you need to know about car leasing, including what it is, how it works and the benefits it can bring your family. So grab a cuppa and let’s find out more about this popular finance type.

What is Car Leasing?

When you lease a car, you essentially ‘rent’ it. Instead of paying outright to own the car, you’ll pay for the car monthly. Unlike other finance options, you don’t own the car and you won’t have the option to buy. You’ll need to return the car to your chosen provider at the end of your contract. 

Buddy’s Top Tip: Car leasing is sometimes referred to as Personal Contract Hire (PCH). Don’t worry about the lingo; they’re both the same thing!

How Does Car Leasing Work?

You’re forgiven for thinking leasing is complicated; it’s a finance option, after all! However, car leasing is surprisingly straightforward. Here’s how it works:

• Choose your car: A.K.A the fun bit! 
• Make an initial payment: How much you pay will vary, but it’s usually the equivalent of around 3-6 monthly payments. The more you pay initially, the lower your monthly payments will be. 

Buddy’s Top Tip: Your initial payment is not the same as a deposit. It goes towards paying the cost of your lease deal, so you won’t get it back at the end of your contract.

• Pay monthly for your car: Your monthly payments are fixed for your contract (usually 2-4 years), so there are no surprises leaving your bank account!
• Return your car at the end of your contract: You can either decide to extend your lease, walk away or lease a different car. 

Benefits of Car Leasing

So many people choose to lease a car over buying outright or other finance options. Here are the main benefits:

• Drive the latest models, regularly: Leasing is a great option if you like to change your car regularly to keep up with the latest models and tech.
• More affordable: Your monthly payments are based on how much value your chosen car will lose during your contract (known as its depreciation). Because you’re not paying against the full value of the car or any interest, monthly payments are usually lower than other financing options. 
• Reduced maintenance costs: New cars typically come with manufacturer warranties that cover most repairs and maintenance during the lease period. Plus, new cars tend to run into fewer issues than older, second-hand cars.
• Tailor-made deals: You can tailor your agreement by deciding how much deposit you pay, the length of the agreement and the mileage you want to use. Tweaking each variable gives you a more personalised deal that fits your family's needs.
• No depreciation worries: Since you don't own the car, you don't need to worry about selling or how much it’s worth.

Car Leasing FAQs:

We’ve covered the basics so far, but you’ll likely still have some questions. Below, we cover some of the most common FAQs around the finer details of leasing a car.

What is a Mileage Limit?

The number of miles a car drives impacts its value; the more miles on the clock, the more the value decreases.

When you lease a car, you’ll be asked how many miles you’ll likely drive in the car per year or throughout your lease deal. This allows the leasing company to factor this into your monthly cost. 

It’s important to provide a realistic mileage limit. It might be tempting to say you’ll only drive 1,000 miles to keep your monthly costs down but if you’re driving 10,000 miles in reality, it can work out more expensive.

This is because you’ll be charged for each mile you travel over your mileage limit. The amount charged per mile usually isn’t much but it can add up over many miles. Set a realistic mileage limit and you’ll have one less thing to worry about. Unsure? Speak to our team for advice. 

What is Wear and Tear?

It goes without saying that you’re expected to keep your chosen car in good condition. Wear and tear policies are used by leasing companies to outline the condition of the car they expect when it’s returned to them.

Of course, we know life happens. That’s why it’s fair wear and tear; we’re happy as long as the car isn’t in bad condition or excessively damaged. We always recommend reading the fair wear and tear policy at the start of your contract though, so you know exactly what’s expected.

You can be charged if your car is returned in an unacceptable condition, so it’s worth taking care of it as best you can. And why wouldn’t you? You want a family car you can be proud of!

Will I Have to Pay For My Car’s Maintenance, Even If It’s a Lease?

Yes, although your car is leased, you’ll still be responsible for arranging and paying for your car’s maintenance, including MOTs and servicing.

Buddy’s Top Tip: You’ll only need to MOT your lease car if it’s over three years old - great news if you choose a two-year lease on a brand-new car. 

Often, you’ll be able to add a maintenance package to your lease deal. This is optional but highly recommended, as it covers the cost of MOTs and servicing within your monthly payment. 

Can I Return My Lease Car Early?

Family life moves quickly; a car that works for you now might not work if you’ve got another child on the way. It is possible to end your lease deal early, although there will usually be a charge associated with doing so. 

If your circumstances do change, speak to our customer service team who will be able to advise you.

Is Car Leasing Right for Your Family?

Car leasing is ideal for families who want the flexibility of driving a new car every few years without the commitment of ownership. It's also a good option for those who prefer lower monthly payments and reduced maintenance costs.

Leasing is perhaps not the most suitable choice for your family if you want to own your family car or have the option of buying the car at a later date. 

For more information on car leasing and to explore our range of family-friendly cars, contact our team of experts today.

Of course, leasing is just one of your options. To learn about our other finance choices, take a look at our guides on What is PCP? and What is Hire Purchase (HP)? For an overview of them all, our guide to the differences between leasing, PCP and HP is a great place to start.