A lease is essentially a long-term rental agreement, offering exclusive use of a car for a set period of time at a fixed monthly price.
Having chosen your vehicle there are four further decisions that will affect the monthly payments:
- The Initial Payment is a payment made after delivery of the vehicle, often a multiple of your monthly payments 1,3,6,9 or 12, however a fixed amount can also be used with some funders. The higher the initial payment the lower the monthly rental.
- The Lease Term you can choose any period between 2 and 5 years, often referred to as the number of months 24, 36, 48, 60. Ordinarily a 2 year lease would have a higher monthly payment than a 5 year contract, though this is not always the case.
- Contract Mileage often calculated on a per anum basis, the mileage allowance is for the duration of the contract, 10,000 miles per anum on a 4 year contract gives a total allowance of 40,000 miles, regardless of how many have been completed in each year. Should your circumstances change this can be amended during the contract, resulting in the relevant changes to your monthly payments. Excess mileage charges will apply if you go over the stated contract mileage.
- Maintenance Package you can choose to add a full maintenance package, this includes all routine servicing, maintenance and mechanical repairs, MOT, replacement tyres and breakdown cover. This will be at a fixed monthly payment over the length of your contract. Should you choose not to add maintenance cover you will be responsible for the upkeep of the vehicle maintainance to manufactuirers guidelines.
Leasing Explained
When Leasing a vehicle you pay an initial rental followed by a series of monthly payments and at the end of the agreement, you simply return the vehicle.
| Advance Payment | Rentals | End Of Contract Process |
|---|---|---|
| From 1 to 12 x monthly rentals. Higher initial payment = lower monthly rental. | Spread across 24 to 60 months. Option to include a maintenance package | Vehicle returned, subject to mileage and fair wear and tear guidelines. The funder for your vehicle will be able to provide you with a copy of the guide. This is usually accessible through their website. |
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Your monthly rentals include:
- Depreciation for the period of the lease, by far the greatest cost of running any new vehicle
- Interest Charges on the outstanding money loaned to purchase the vehicle.
- Vehicle Excise Duty (Road Tax) for the contract period. (included rate as at time of quoting, future increases invoiced seperately)
- Full Maintenance (if chosen) covering everything from servicing to tyres and breakdown repairs essentially anything that is not the result of abuse or accident.
Leasing a car lets you avoid any unexpected costs by offering a fixed monthly payment for the term of the lease. Unlike dealer finance or bank loans you only pay for the depreciation of the vehicle over the term rather than the full capital value. Rather than pay large deposits you simply pay an initial amount, usually equivalent to three monthly payments, at the start of the lease.
Then, at the end of the lease period, you simply hand the car back. The job of selling the car and picking up the tab for depreciation is the responsibility of the lease company.
If you take a maintenance agreement your only responsibility is to fully insure the vehicle throughout the contract and return it good condition and within the agreed mileage allowance. Do not worry if you go over your mileage as there is either a simple excess mileage charge or some finance companies will change your payments mid contract to reflect your change in circumstances.
