Car Leasing Explained

Why would you pay monthly for a car and then just give it back?

because it might be cheaper than buying it; that’s why.

Why lease a car?

In the world of automotive financing, car leasing has emerged as an increasingly popular and flexible option for individuals and businesses alike. By providing an alternative to traditional vehicle ownership, car leasing offers numerous benefits and financial advantages. In this comprehensive guide, we will delve into the intricacies of car leasing, explore its advantages and disadvantages, discuss various types of lease agreements, and provide essential tips to help you make an informed decision when considering this option.

Understanding Car Leasing

Car leasing, also known as Personal Contract Hire (PCH), is a form of long-term rental where you have the opportunity to drive a brand-new vehicle for a fixed period, typically between two to four years. LeaseLoco, a leading provider in car leasing solutions, offers a wide range of lease options to cater to different needs and preferences. When you lease a car, you don't actually own the vehicle; instead, you make monthly payments to LeaseLoco for the duration of the lease agreement. At the end of the lease term, you return the car to LeaseLoco without any further obligations.

How Car Leasing Works

Similar to purchasing a car through finance, leasing involves making regular monthly payments over the course of the agreement. The amount you pay depends on factors such as the car's value, the lease duration, and the agreed mileage limit. Additionally, an initial payment, equivalent to a few months' worth of lease payments, is required at the beginning of the agreement. Generally, a higher initial payment leads to lower monthly installments.

Lease agreements are often described using numbers such as "3 + 23" or "6 + 35." These numbers indicate the initial payment and the subsequent monthly payments, respectively. For example, a 3 + 23 deal entails an initial payment equivalent to three monthly payments, followed by 23 monthly payments. It's important to note that the initial payment is not a deposit in the traditional sense and is used to offset part of the overall lease cost. It should be noted that No Deposit Car Leasing Deals are also sometimes available

Throughout the lease period, certain conditions must be adhered to. One crucial consideration is the mileage limit, which is agreed upon at the beginning of the lease. If you exceed the predetermined mileage, you may incur additional fees per mile over the limit. To avoid excess mileage charges, it's recommended to discuss any potential adjustments to the mileage limit with LeaseLoco before finalizing the lease agreement. Additionally, car leasing deals typically do not include insurance, so you'll need to secure your own insurance policy.

Personal and Business Leasing

Car leasing is available for both personal and business use. Personal leasing, often referred to as Personal Contract Hire (PCH), allows individuals to lease a car for personal use. On the other hand, business leasing, known as Business Contract Hire (BCH), enables companies to lease vehicles on behalf of their employees for both personal and business purposes. Business leases often come with higher mileage limits to accommodate the demands of corporate travel.

Requirements for Leasing a Car

To lease a car, you'll need to provide certain documents and meet specific criteria. First and foremost, a valid driving license and proof of address, such as a council tax or utility bill, are typically required. Some leasing providers may also request proof of income, usually in the form of several months' pay slips. It's advisable to check your credit score before applying for a lease, as a poor credit rating may affect your eligibility. In such cases, some providers may allow you to nominate a guarantor who will be responsible for payments if you're unable to fulfill them.

Comparing Leasing Deals

There are lots of sites and comparison sites offering lease deals online but LeaseLoco offers a convenient platform to compare and find the best leasing deals on the market. Through LeaseLoco's user-friendly search functionality, you can easily browse deals based on make and model, car type, or monthly budget. The platform provides a comprehensive list of top leasing deals from reputable providers. Not only can you save money, but LeaseLoco's network of trusted dealers can also deliver your chosen vehicle directly to your doorstep at a time that suits you.

Is Leasing Better Than Buying?

Determining whether leasing is a better option than buying depends on various factors and personal preferences. Car leasing can offer several advantages, including, at times, lower monthly payments compared to traditional finance options. By opting for a lease, you avoid the concerns of depreciation and the hassle of selling a vehicle. Leasing also provides the opportunity to drive a brand-new car every few years, further enhancing your driving experience. However, if long-term ownership and freedom from mileage restrictions are your priorities, purchasing a car through other financing methods, such as hire purchase, might be more suitable.

What are the downsides of car leasing? check out this blog post to learn more.

In summary

Car leasing offers a flexible and cost-effective way to enjoy the benefits of driving a brand-new vehicle without the responsibilities of ownership.

By understanding the mechanics of car leasing, comparing deals, and meeting the necessary requirements, you can make an informed decision and embark on an exciting leasing journey.

Whether you choose personal or business leasing, LeaseLoco's comprehensive range of options ensures that you'll find the perfect vehicle for your needs. Why not check out the latest deals here.

Car Leasing FAQs

  • Contractually no. You simply hand the car back to the company. Our leasing partners will usually collect it for free, so if you plan ahead you could even get your next lease car dropped off at the same time.

    However, in reality, you can usually request a purchase price in the last 3 months of the lease and will often get the chance to buy the car (not always though!)

  • Leasing a car can often prove to be more affordable than buying.

    Unlike other car financing methods where you pay the full cost of the vehicle, leasing allows you to make payments based on the depreciation value.

    Although you don't own the car, leasing provides the advantage of regularly changing your vehicle while maintaining low monthly payments.

  • No, you’d need to sell your car privately or via a used car buying service. Check out our free guide to Selling Your Car.

  • Consider how long you keep your cars for, what you spend on them in MOT and servicing and then the price you get when you sell or part-exchange the car. Say you buy a car for £25k, keep it for 3 years, spend £2,000 on repairs and tax etc then sell it for £15k - your total cost of ownership was £12k for 3 years. If you could have leased the same car from new, for the same period of time and had it cost you less, then there is the reason.

    Depreciating assets like cars are not always cost-effective to own.

  • Usually, yes. The best deals are usually only available to those who pass the relevant history and affordability checks.

    There is a sub-prime market for leasing but the deals are likely to be less attractive.

  • Certain finance companies might offer lease contracts for used cars, the industry standard is primarily focused on leasing new vehicles.

    The advantage of leasing a new car is that it comes with the manufacturer's warranty, providing added peace of mind for the lessee.

    It’s our opinion that used car leases don’t often make good financial sense.