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Car Leasing Buyers Guide

Below you will find some helpful information about the process of leasing a car.

What is Car Leasing

Car leasing is a way of paying for the use of a car over a specified period of time.

It is very similar to renting, but instead of hiring a vehicle for a short period ( like one or two weeks ) leasing typically lasts for between 12 to 48 months.

When leasing a car, you don't actually own the vehicle, you are simply hiring it - which can bring some added benefits.

How Does Car Leasing Work

The car you wish to lease will have a retail ( on the road ) price - that is the money it would be worth if it you had to buy it when the contract starts. However with leasing you're not buying the vehicle, you're leasing it - so another value of the vehicle has to be determined.

This is the 'residual value', which is an estimate of what thevehicle will be worth at the end of your lease contract - after depreciation istaken into account. This is often determined by the length of contract and the annual mileage that will be done.

Your monthly payments are then based on the difference between the retail price and the residual value. This means you don't pay for the full price of the car, hence the lower monthly payments (compared to financing the entire cost of buying the car).

At the end of your lease, you simply hand the car back to the leasing company.

You will then have the option of taking out a lease on another new car. Or depending on what type of contract you had, you may be able to keep the vehicle by means of a final payment. ( often called the balloon payment )

Compare Leasing Against Buying

Car Leasing is the future way of owning new cars and changing them every 2 or 3 years without losing thousands of pounds and having the problems of being in negative equity.

Not many people have the cash to buy a new car without some form of finance, even if you do have the funds to buy a new car outright you can still lose serious amounts of money should you chose to change it within the first 3 years.

Through research and customer feedback we have established that a high percentage of people buying a car on Dealer Finance or taking a Personal Loan choose to change vehicle only to find the settlement figure ( amount outstanding on the loan ) is often higher than the trade in value of the car therefore resulting in a status of negative equity.

Negative Equity usually poses a big problem to the consumer, the solution to this is Car Leasing, also known as Contract Hire. In the past contract hire has been associated with business and company fleets, this is no longer the case. Personal car leasing is now increasing rapidly throughout the UK and is now one of the most popular funding solutions.

Benefits of Car Leasing

No huge up front costs, car loans or capital outlay. In most cases Contract Hire agreements have a small initial rental ( often 3-6 monthly payments in advance )

Monthly repayments will on average be considerably less than the repayments of a car loan on the same vehicle.

Peace of mind that the rental costs will remain at the same level throughout the duration of the lease. The cars warranty period will normally cover the duration of the lease and various maintenace packages can be added to cover servicing, tyres etc.

Road Fund Licence and Breakdown Cover is usually included in the monthly lease price for the duration of the contract.

You will be able to drive a car that may be out of your budget in terms of purchase price.

Early Termination

The contract is usually for a fixed period and early termination of vehicles will not normally be permitted. There sometimes can be exceptional circumstances where the early termination of a contract becomes necessary, such as financial difficulty. There is a formula for this is will be usually be found in the contract terms and conditions of the lease agreement.


Condition of Vehicle

You as the hirer are responsible for the condition of the vehicle during the contract period. This will be determined by the condition reports which must be signed by you on delivery and collection of the vehicle. Every vehicle should be returned in a condition that is consistent with a used vehicle of the same age and mileage. Vehicles will be inspected for body damage, driver negligence and warranty / service infringements. If expenditure is required for repairs like dents, scratches or missing items, the cost will be invoiced to you for immediate payment, subject to the Fair Wear and Tear conditions in the agreement.

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