Guide to Car Leasing

  • By Michaela Crawford
  • 7 min read

If you're thinking of leasing a car for the first time, this guide will provide you with all the info you need.

A Ford Fiesta

We’ve made this guide to explain everything you need to know about what car leasing is and how it all works. If you’re new to leasing it can be confusing, so hopefully, by the end of this guide, you will be happy and ready to check out our bargain lease deals.

What Is Car Leasing?

Leasing a car or van is a similar process to leasing or renting a property. You pay fixed monthly payments for an agreed period of time, as you would when renting a flat from a landlord. At the end of the contract, you simply hand the car back to the leasing company and never own or buy the car. This means that the monthly payments are usually significantly cheaper than other car finance options, meaning you can enjoy driving a brand new car every few years without the worry of it depreciating and having to sell it after time.

How Does Leasing Work?

The first thing to do is to start searching for the car you want to lease and find a deal that works best for you. You will need to decide the term agreements that you want for your new car. This includes the length of the contract (usually between 2-4 years), how much you would like to pay upfront and also your annual mileage. After contacting our leasing partners, they will discuss your quote with you and then you will be required to undergo a few checks, including a credit check. Once this has been approved, then you will sign your lease agreement with the T&Cs and organise the delivery date of your new car. Our leasing partners will deliver your car straight to your doorstep for free.

Road tax, manufacturer’s warranty and breakdown cover are all included in the cost of the lease deal, which takes some hassle out of your way. Usually, maintenance and servicing are not included in the cost of the lease, but our leasing partners will be more than happy to give you a quote if this is something you would like. Just like buying a car, you will need to organise insurance yourself before the delivery date of your car. This is pretty much the same as organising insurance for a car you have bought, except the registered owner of the car is the leasing company.

Once your car is delivered, then you will begin to pay your monthly payments and get to enjoy your brand new set of wheels! At the end of the lease deal, you simply hand the car back (which is usually collected for free by leasing companies). The car will be checked for any heavy damage beyond fair wear and tear, and that it is within its mileage limit. General wear and tear won’t constitute for any damage costs to be paid as it will never be expected for a car to still be in a brand new condition.

What Are The Benefits Of Car Leasing?

There are some incredible advantages to leasing your car with the biggest reason being cost savings. Our why lease page breaks down how you can save thousands of pounds by choosing to lease over other car finance options. Leasing also gives people the opportunity to drive a brand new car for low fixed monthly payments that they can afford and budget around. Plus, you can change your car every few years and continue driving brand new cars without the hassle of having to sell your old one. Car leasing is a simple process and takes a lot of the stress away from depreciation worries, paying road tax and selling your car.

What Is The Difference Between Buying And Leasing?

There are quite a few differences between buying and leasing, and the option you choose will ultimately come down to your personal preferences and circumstances. One of the most obvious things is that with a car lease you will never own the car and you return it at the end of the lease, while if you buy one then it is yours to keep and use however you would like. This means that the upfront costs differ too. If you buy a car, you will likely need to put a large upfront payment down, typically around 10% to get a good rate. Leasing can be more flexible by offering payment profile options, including no deposit options if this suits you, and the monthly payments are significantly cheaper through a car lease.

There are also differences in the way you can use the car. If you buy a car you don’t need to agree to an annual mileage limit and you can make any modifications to your vehicle as you like. With a leased car, any modifications will need to be removed before you return the car so you won’t be able to make any permanent alterations.

What Are The Different Leasing Types?

Car leasing is also known as Personal Contract Hire (PCH), and the other type that many people consider is Personal Contract Purchase (PCP), which means the option to buy.

Personal Contract Hire

PCH is car leasing as we have discussed, where you can drive a brand new car every few years on low monthly payments with no depreciation worries or stress of having to sell the car.

Personal Contract Purchase

PCP is quite similar to PCH, however, you will get the option to buy the car at the end of the agreement through an optional balloon payment, or have the car back like you would with a lease. As you have the option to buy the car, the monthly payments are usually higher. So if you think you will be returning the car after a few years then PCH will work out cheaper for you. We also have a handy guide on the differences between PCH and PCP and the advantages of each.

Leasing With LeaseLoco

Making it super quick and easy for you to search for your brand new car lease is our number one goal at LeaseLoco, and we’re confident that you can find a great deal in just a few clicks using the filters on our search page. Once you’ve found a deal you like and have gone through the leasing application and process with our leasing partners, all you need to do is sit back and wait for your brand new car to be delivered to your doorstep.

Search and compare the hottest car lease deals on the market now.


Can you buy a car after leasing it?

No, there is no option to buy a car at the end of a lease deal. You simply hand the car back to the company. Our leasing partners will usually collect it for free, so if you plan ahead you could even get your next lease car dropped off at the same time.

Is leasing a car cheaper than buying?

Leasing a car can be much cheaper than buying a car because the monthly payments are lower as your entire payment won’t cover the full cost of the car, unlike other methods of paying for a car and buying it. While you never own the car, you will get the regular opportunity to change your car and continue paying low monthly payments.

What happens if you crash a leased car?

If you are involved in an accident with your lease car, you will need to inform the leasing company and your insurance company. Your insurance company will carry out any repairs covered by your insurance policy and you can then be back on the road again. If the car is completely written off, then the funder will provide a settlement figure to end your lease contract. While your insurance will usually give you a fair market value of the car to help cover this, there can often be a shortfall. For this reason, gap insurance may be worth considering as this would pay the difference of the shortfall on this occasion.

Is leasing a car the same as renting?

Leasing a car is very similar to renting a property as you don’t ever own the car, you just have it for an agreed period of time, pay fixed monthly payments to the owner and hand it back at the end of the contract. You will need to agree to an annual mileage to lease your car though!

How long is a car lease?

The most common length for a car lease is 2-3 years, and often 4 years. The length of a car lease depends on personal preferences and budget too, as the monthly prices may vary between different term lengths. There may also be short-term contracts available for those looking to lease for shorter periods. As we are a price comparison site, the deals supplied to us usually range 2-4 years, with, on the rare occasion, 12 or 18-month terms. However, we don’t have any short term lease deals at the moment, but there will certainly be leasing companies that specialise in these.

Is car leasing only for new cars?

All of the cars advertised on LeaseLoco are brand new cars. There may be certain finance companies who will offer lease contracts on second-hand cars, however, the standard practice is that car leasing is for new cars. The even better news is that because the car is brand new it will come with the manufacturer’s warranty included.

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