How Does Car Leasing Work?

  • By Michaela Crawford
  • 6 min read

If you're leasing a car for the first time, this guide will help provide an insight into what to expect from the leasing process.

Mini Countryman JCW

Leasing a car works in the same way as leasing or renting a property. You may need to pay an upfront payment and then you will pay a fixed amount of money for an agreed period of time for the car / property. When you rent a flat, it is your landlord that owns it and you live in it until the contract ends and you move out. Leasing a car is very similar as you never own or buy the car, you simply hand it back at the end of the agreement. Car leasing is one of the most affordable and simplest ways to access a new car as the monthly payments are generally cheaper than other car finance options. We discuss the process of car leasing and leasing with LeaseLoco in this guide to help you see whether it may be the right choice for you.

What Is The Process When Leasing A Car

We understand that often car leasing can seem confusing, especially if this is your first time leasing! So we want to make it as clear as possible and provide a step by step process to ensure you understand how it all works.

Leasing Process

  1. Choose your carThis step is definitely the most fun! Decide what type of car you are looking for; if there are any particular spec options you may want; the colour of the car you want; and if you’re looking for something that’s in stock now or available in a few months with a factory order.

  2. Decide term agreementsOnce you have decided on a car you like, and have found a deal you want to go for, the next thing to do is figure out the lease profile that will suit you best. You need to decide how long you want the lease to last (typically the most common lease length is 2-3 years). The next thing to do is decide how much you would like to pay upfront. With car leasing, you have the option to pay 1, 3, 6, 9 or 12 months upfront. This will be completely down to what suits you best. Some people prefer a no deposit deal and will stick with a 1+ profile, while others prefer to pay a higher amount upfront to reduce the monthly payments for the rest of the term. Either way, the total cost of the lease will remain the same. You will also need to choose an annual mileage for the car. If you haven’t chosen your mileage in a car deal before, we have a handy guide with everything you need to know about annual mileage to help.

  3. Provide finance details and undergo checksAfter contacting our leasing partners and discussing a quote with them based on your requirements, they will require you to carry out a number of checks, including a credit check. Once this has all been approved, you will sign some documents including the lease agreement with all the T&Cs included to secure the deal. There may be a one-off broker arrangement fee with some leasing companies that you will pay at this point.

  4. Delivery of the carOur leasing partners will deliver your car for free straight to your door, arranged on a date that suits you. So you can make all your neighbours jealous as your brand new set of wheels is dropped off!

  5. Enjoy your brand new carProbably the best part of the leasing process.. You get to enjoy your brand new car and experience all of the latest car technology and features.

  6. Return your carWhen your lease comes up to an end, all that happens is you simply hand the car back – which is usually collected for free by our leasing partners. When they do this, they will check some paperwork, check the car is within its mileage limit, and inspect the car for any damage. The car won’t need to be in a brand new condition and general wear and tear won’t constitute for any damage costs to be paid. If you are organised, you could discuss with the leasing company to get a new car delivered at the same time the other is being collected!

It’s also worth noting that insurance is something you will likely need to organise yourself before the delivery date of the car. Every vehicle in the UK is legally required to have insurance and this includes lease cars & vans! It’s very similar to organising insurance for a car you have bought, except that the leasing provider will be the registered owner of the car. This also means that they are responsible for your road tax.

Leasing With LeaseLoco

Now that you’ve read about how leasing a car works, you can search and compare the huge range of lease deals on offer including:

As the UK’s biggest car leasing comparison sire, we are confident that you will find a deal that’s right for you in just a few clicks. We have the highest criteria for on-boarding leasing partners that we advertise on this site to make sure you get to deal with the highest quality companies that are around.

If you’re new to leasing, we have other leasing guides, a leasing blog and general FAQs on leasing available that you may find helpful.


What are the pros and cons of leasing a car?

The great thing about car leasing is that you can drive a brand new car every few years for a fixed low monthly cost, and there are no depreciation worries and no hassle of selling your car! However, you will never own the car when you lease it, and there is also less flexibility due to mileage allowances and limitations to modifying the car as you wish.

What happens at the end of a car lease?

At the end of the car lease, you simply hand it back to the leasing company (who will usually collect it for free). They check some paperwork, check the car is within its mileage limit and check there is no major damage beyond fair wear and tear.

Does leasing a car hurt your credit?

As car leasing is a form of finance, it will affect your credit score in the same way that a Wi-Fi contract or other monthly payments would. If you don’t make the monthly payments for a car lease on time, then this could negatively impact your credit score. If you’re making your monthly payments on time, then this could improve your credit score.

Do you own the car after a lease?

No, when you lease a car you never own it and never get the chance to buy it. With other finance options, such as PCP, there is the option to pay a balloon payment to own the car at the end of the contract, but this is not an option for car leasing. The good thing is that this makes the monthly payments typically a lot cheaper than other car finance options!

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