First-time car leasing
Leasing a car for the first time? We clear the fog surrounding the mysterious world of new car leasing, to help you make an informed choice...
Leasing is effectively a long-term rental agreement, allowing you to have a vehicle for a fixed monthly payment over, say, three years, after which you hand the car back, and can replace it with a new model.
How much does car leasing cost?
Car leasing deals are normally calculated over periods of two, three or four years. When you see deals advertised as 3+23 or 3+35 contracts, this simply means you'll face a down payment equivalent to three times the quoted monthly payment, followed by 23, 35 or 47 monthly payments, depending on the term of the lease.
The monthly payment is determined by the type of vehicle, length of contract and mileage limit chosen.
You can request quotations on alternative terms and mileage direct from the dealership or you leasing provider.
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Most providers will publish lease quotes for a standard mileage of, say, 6000 miles, but you can also request a quotation with a lower or higher mileage limit to suit.
An annual mileage allowance is agreed prior to the start of the contract, so it pays to estimate your annual mileage accurately because you'll face additional charges if you exceed the mileage limit. The cost of excess mileage can vary between finance companies but will be clearly displayed before commencement of your contract.
Types of car leasing deals
Personal contract hire (PCH) – this is the best choice when you are using the car for personal use or have a vehicle allowance through your employment. Advertised prices include VAT.
Business contract hire (BCH) – advertised prices are exclusive of VAT. This is a better option for business users because the VAT can be reclaimed during the term of your lease; this is called 'blocked VAT'. To do this, your company must be VAT-registered.
Do I need a credit check to lease a car?
Once you have chosen your preferred vehicle, you will be required to complete a credit check and declare personal information including your name, address, employment details and income. This form will be sent to you via the dealership for completion. The dealership will then submit your application to the finance company, which will use it to determine whether you are eligible to continue with the lease. Occasionally the finance company will request additional information to support your application, such as bank statements.
The vehicle will belong to the finance company throughout. You will be the registered keeper of the vehicle.
What are car leasing admin fees?
Some dealerships may charge an administration fee that is payable upfront. This will be clearly stated within the quotation details.
Are lease cars delivered?
Some lease deals may come with free UK delivery arranged by the dealership and can be delivered to your choice of location. Some dealerships may provide free delivery only within a certain radius but this will be clearly stated within the dealership information.
When leasing a new car, your vehicle will be covered by the manufacturer-backed warranty. Under this, any non-consumable parts that go wrong within this period will be replaced at your local dealership free of charge (refer to your documentation to check what is covered in your warranty).
Many car warranties are provided for three years so if you have a leasing contract of three years or less, then the vehicle will be covered throughout your agreement period. However, manufacturer warranties vary, so always check beforehand.
Lease car maintenance packages
Maintenance packages are often optionally available with lease deals, which will cover the servicing costs for the length of your contract – speak to the dealership for pricing information and what is covered in the maintenance package.
It will be your responsibility to have the car serviced in line with the manufacturer service intervals.
Road tax and MOT
Personal and business contract hire agreements may also include road tax (VED), you should check with the dealership to confirm this.
All lease cars are new so won't require an MOT test until three years old. You shouldn't need to put one through an MOT test unless your contract is longer than three years.
Lease car insurance
Insurance is not included within your lease contract. You will be required to contact your preferred insurance company to arrange cover. In the case of an accident, you will contact your insurance provider in the usual way.
When the contract ends
At the end of the contract you simply hand back the car, ensuring it is returned in a roadworthy condition without any internal or external damage other than usual wear and tear. It makes sense to repair any damage to a lease vehicle before the contract ends because you'll face extra charges to cover any necessary repairs.
If you want to start a new lease, you should organise this well in advance of the current lease ending.
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