What is Car Leasing?

Car leasing is a form of finance that provides an alternative to buying a new car outright. Car leasing is essentially a long-term car rental that allows you to drive a state-of-the-art car for a set number of miles, over an agreed period of time.

Unlike other car finance options, however, you will not own the vehicle by the end of your car lease. Instead, you pay an initial deposit, followed by a fixed monthly payment for the lease period – usually around two to four years. Then, at the end of your contract, your car will be collected by the leasing company.

Leasing a car is often more affordable than buying a car outright or through traditional finance. But is it right for you? Read on to find out how car leasing works.

Car leasing works as a type of car finance similar to a long-term rental.
Leasing a car is a great option is you want to drive a new car, make affordable payments, and return it hassle-free once your lease ends.
Business leasing offers many benefits for companies, including fixed monthly costs and easy renewals.

How Does Car Leasing Work?

Personal car leasing is a fairly simple process:

Browse Car Leasing Deals
Decide what type of car would suit you best: petrol, electric or hybrid? Saloon, SUV or convertible?

At Leap, we have hundreds of car leasing deals to choose from.
If there’s a particular vehicle you’re interested in, please contact our Sales team

Agree on Terms and Conditions

These can vary but will always include:

The contract length.
Agreed mileage for the duration.
Any optional extras for your car.

You should:

Estimate your expected mileage as accurately as possible to avoid excess mileage penalties.
Avoid overestimating mileage to ensure you receive the best deal.

Leap can provide multiple quotes to help you make your choice.

Agree on Price and Complete a Finance Application

Leap will find you the best deal from preferred suppliers.
Once agreed, you will be asked to complete a finance application.
Car leasing is subject to credit checks, which include your monthly income and bank details.
Get Approved and Order the Vehicle
After finance approval, sign the car lease order form.
Leap will order the vehicle on your behalf and keep you updated on its location until delivery.

Sign the Car Lease Agreement

When the car arrives at the dealer, sign the lease agreement.
Some manufacturers may require the initial payment upfront, though not all.
The initial payment is usually an amount equivalent to 3–12 monthly payments (as agreed in your contract). This is a non-refundable deposit.

Delivery

Delivery of your lease car is free of charge.
Your monthly payments will begin after delivery.

What Happens at the End of a Lease?

If you stick to the agreed mileage limit and keep the car in good condition, there shouldn't be any extra charges.
Simply hand the car back. At the end of the lease, Leap will arrange for the car to be collected for you.

Additional Notes:

If you exceed your mileage limit, you may have to pay an excess charge.
You are responsible for covering the cost of any repairs if the car is damaged beyond reasonable wear and tear.

Once complete:

Sign the release papers and hand back your keys.
Then you can either walk away or start a new car lease.

Is Insurance Included in a Lease?

Insurance is not usually included in a car lease.
You must arrange appropriate insurance cover, ensuring it is fully comprehensive (not just third-party insurance).

Car leasing also does not typically include maintenance and repair services, though this can be added to your contract if necessary. It is your responsibility to:

Ensure the car is well looked after.
Be aware that damage beyond reasonable wear and tear may incur an excess charge at the end of your contract.

What is the Benefit of Leasing a Car?

With a car lease, you can:

Drive away in the car of your choice.
Hand it back hassle-free at the end of your contract period.
Enjoy lower initial payments compared to other finance options.
Benefit from affordable fixed monthly payments without worrying about the car's depreciation in value.

What is Personal Leasing?

Personal leasing – or Personal Contract Hire (PCH) – is a lease agreement for personal use. Key points include:

Initial payment followed by fixed monthly fees.
An agreed mileage cap.

At the end of the contract:

Any excess fees or damage charges are solely your responsibility.

What is Business Leasing?

Business leasing – or Business Contract Hire (BCH) – is similar to personal leasing, but for business use.

Key benefits include:

Fixed monthly payments that can improve cash flow.
VAT-registered companies can claim back 50% VAT on a business lease car.

Note:

Penalty fees apply for exceeding mileage or returning a damaged car.
Some employers may pass these charges on to employees who drive business-leased cars, so check your employer's policy.

Leasing vs PCP

Leasing and Personal Contract Purchasing (PCP) share some similarities, such as initial fees and monthly payments, but differ in one key point:

Leasing:
- At the end of the lease, you must return the car to the dealer.
PCP:
- At the end of the contract, you have three options:
  1. Return the car to the dealer.
  2. Trade the car in for a new PCP contract.
  3. Pay a final lump sum (balloon payment) to purchase the car outright.

PCP offers more flexibility, but the monthly payments are usually higher, and interest rates can vary. If you don’t want to own the car, leasing is often the more affordable option.

Summary of Car Leasing

If you want to drive a new car but balk at the cost of buying outright, leasing could be a great option.

Key benefits include:

Lower deposit and monthly payments compared to other finance options.
Hassle-free returns at the end of the contract.
The ability to upgrade to a new car every few years without worrying about depreciation.

What is Car Leasing?