Car Leasing FAQ

Why should I lease a car?

When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it. You typically make a down payment, pay sales taxes in cash or roll them into your loan, and pay an interest rate determined by your loan company. You make your first payment a month after you sign your contract. When you lease, you pay for only a portion of the vehicle's cost, which is the part that you "use up" during the time you're driving it.

Example
As an example, if you lease a car that costs £20,000, but is worth only £13,000 after 36 months, you pay for the £7000 difference (this is called depreciation). When you buy, you pay the entire £20,000, plus loan interest charges, plus fees. This is fundamentally why leasing offers significantly lower monthly payments than buying.

Is there a mileage limit?

Lease contracts limit the number of miles you can drive, from 6,000 miles per year up to 150,000 total miles for the contracted period. If you exceed your limit, you're slapped with "excess mileage" charges at the end of the lease. Sometimes, additional miles — if you know you'll be driving more — can be "bought" up front at the time you sign your lease, at a lower per-mile cost. To keep the cost of the lease as low as possible, try to ensure that you are only contracted for the miles you think you will drive. Higher mileage contracts means higher monthly payments.

What level of wear and tear is expected?

Leasing companies require that you return their car at the end of the lease with no more than "normal" wear-and-tear. Anything more and you'll pay for the damages. You are responsible for insurance, upkeep, and maintenance just as with a purchased car. Some people mistakenly believe the leasing company is responsible.

When I lease do I have any ownership of the vehicle?

When you lease, you don't have ownership, unless you choose to buy at contract-end - which about a third of all leasers do. Leasing is not all that different than buying with a loan, in which case the bank holds the title and you don't own your car until the loan is paid off. At the end of the contract hire period you can obtain a price from the supplying company which is usually at trade rate or sometimes better.

How often can I get a new car?

One of the benefits of leasing is that you can drive a new car every two, three, or four years. To many people who lease, this is an acceptable tradeoff with having to make ongoing payments considering the benefit of always having a new car that is always under warranty. And you still have the option to buy at the end of the lease if you decide you want to keep hold of a particular car.

Do I need to make a down payment on a lease?

Making a down payment can substantially reduce your monthly payment amount. If you think you might ever want to end your lease early, an initial down payment can reduce or eliminate the cost of early termination.

What does full maintenance mean and what does it cover?

Full Maintenance is an additional cover over and above the normal dealers warranty for you. You pay an extra premium per month on top of the agreed car finance cost and this covers you for everything except for insurance and petrol. As all leased cars are required to have their services, a full maintenance contract also covers this cost, as well as any tyres that may be needed. Generally, a full maintenance contract is not financially advised for contracted mileage of under 15,000 miles per year as the extra cost can outweigh the normal costs incurred of maintaining your car. But it does offer piece of mind.

Can I customise, modify or repaint the car?

A leased car doesn't belong to you, it belongs to the leasing company. Therefore, you cannot make modifications and install custom equipment that alters the car. If you do, you'll likely be charged for the cost of repairs to undo what you've done.

What cars make the best lease cars?

Ideally the best cars to have on a contract lease, whether it's business or personal, are the makes that hold their value for a longer period. If a car loses its value quickly over the contract period this can increase your monthly payments as this is what the payment calculation is based on. The example in question 1 above should help illustrate this point.

What happens if my contract hire car breaks down?

All cars supplied come with a manufacturer's 3 year warranty. If the repairs that are needed arise through use by the driver the agreement owner has full responsibility, unless a full maintenance contract is arranged. If it's an issue that is covered by the warranty simply book the car into your nearest garage that specialises in the particular make of car and ensure that you take all the contract paperwork with you. The repairs will be covered fully by the warranty and at no cost to you.