How Much Does It Cost to Lease a Car?
Monthly car lease costs in the UK can range from an affordable £170 per month to £2000+ per month for luxurious models.
However, these monthly payments are just one part of the total cost. You’ll also need to factor in additional costs like the initial payment, processing fees, insurance, and maintenance.
At Leap Vehicle Leasing, we believe in transparency, so this guide will help you understand all the costs involved, breaking down:
- The total cost of a lease deal.
- The differences between personal and business leasing.
- Key factors that influence your budget.
Car Leasing: Breaking Down the Costs
Car leasing is essentially a rental agreement. You pay to drive a new car for an agreed period (usually 2–3 years) and return it at the end of your lease.
Main Costs to Consider:
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Monthly Payments
- Include depreciation, interest, and taxes.
- Vary based on your vehicle model, contract length, and initial payment.
- Paid directly to the finance company, starting one month after delivery.
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Initial Payment
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Processing Fees
- A one-time fee of £250 + VAT.
- Covers services like finding the best deals, assisting with finance applications, ordering your car, and arranging delivery.
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Insurance
- Must be arranged by you.
- Needs to be in place before your car is delivered.
- Costs depend on the vehicle’s value, your driving record, and other factors.
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Maintenance
- Essential to keep your car in good condition during the lease period.
- Options include adding a Maintenance Package or paying for routine servicing and repairs at your local garage.
Factors That Influence Monthly Lease Costs
Several factors can affect the monthly price you pay:
1. Vehicle Model and Trim Level
- Luxury models, advanced technology, and hybrid/electric cars result in higher monthly costs.
- Consider your needs and budget carefully.
2. Lease Term
- Longer contracts often have lower monthly payments.
- Shorter terms offer more flexibility.
3. Initial Payment
- A higher upfront payment reduces monthly costs.
- A lower initial payment results in higher monthly payments.
Learn more in our Guide to Initial Payments.
4. Mileage Allowance
- The higher the mileage limit, the higher your monthly payment.
- Accurately estimate your mileage needs to avoid excess mileage charges.
Why is Business Leasing Cheaper Than Personal Leasing?
Business leasing is often cheaper because companies benefit from:
- Tax Advantages: VAT-registered businesses can reclaim up to 100% of VAT on lease payments.
- Negotiation Power: Companies leasing fleets can negotiate better deals.
These tax incentives and cost-saving benefits aren’t available for personal lease agreements, which makes business leasing a more affordable option for eligible companies and sole traders.