How does car leasing work in the UK?

It’s popular in America, and now it’s becoming increasingly popular over here in the UK. But, what exactly is car leasing? And, how does it work?

We understand that if you’re new to leasing, sometimes there is a lot of information that doesn’t really make sense. And, it can be difficult to understand just how leasing works.

You won’t be surprised to hear that we at OSV, the vehicle supply company, are experts in car leasing. So, we thought we would write an essential guide to car leasing, how it works in the United Kingdom and why it may be the best choice for you.


What is Car Leasing?


So, first thing’s first, what is car leasing?

Basically, you have your car for a set period of time. The length of the contracts can range from 1 to 5 years but are usually 2 to 3 years. You then make monthly payments for the duration of your agreement and when that time is up, you hand the car back. It’s pretty simple.


What is the difference between leasing a car and buying a car?


Essentially, the biggest difference is that when you lease a car, you don’t actually own it. That’s why you return it at the end. Whether this is a good thing or a bad thing is entirely dependent on the person. Some people like the idea of being able to return their car and to not worry about things such as depreciation and disposal. Others, however, like the thought of owning their car and not having mileage restrictions (more on mileage restrictions below).

The other difference between leasing and buying is maintaining the condition of the vehicle. If you own the car you have more freedom to decide when it gets serviced, where you get the repairs done, etc. However, if you lease, you are responsible for keeping the vehicle in good condition. This is because you are essentially renting the car for a period of time, therefore you have to keep your car up to industry standard. [vc_single_image image=”4883″ img_size=”article-image”]

What Are The Different Types of Lease Contracts?


There are a variety of lease contracts that are available to you, and suit pretty much every need.


  • Personal Contract Hire:
    • Personal contract hire, also known as private contract hire, is one of the most popular ways of leasing a car. This is ideal for private individuals who want a new car every few years.
  • Business Contract Hire:
    • Essentially the same as personal, but for business use. The company will have the car, or cars, for a few years. There are various VAT benefits that come with business contract hire. 
  • Finance Lease:
    • A finance lease is perfect for those who will be doing extremely high mileage, or whose cars will suffer more than their fair wear and tear. There are some differences between finance lease and the other agreements in terms of what happens at the end of the contract, however.

Or, if you really don’t want to download each individual eBook, you can download the OSV Ultimate Leasing Guide.


What Are the Pros and Cons of Leasing a Car?


We’ve talked about what sort of lease agreement you could get, but what are the advantages and disadvantages of leasing?

The Pros of Leasing a Car


  • Less maintenance
    • When you get a brand new car, the cost of the maintenance will be considerably less than on a used car. Also, all lease cars come with a manufacturer’s warranty. This usually lasts for three years.
    • Breakdown assistance and road tax is also usually included in the lease agreements.
    • You may also be offered a maintenance package, which will cover servicing. You can read more about what is included in a maintenance agreement here.
  • The upfront cost is low
    • The upfront cost of a lease car is typically less than if you were to buy. Usually, people put down £1000-£2000. Of course, you can put more down and face lower monthly payments, but it’s ultimately your choice.
  • You don’t have to worry about the disposal of the vehicle
    • This is appealing to many people. You get to hand the car back at the end which means you don’t have to worry about selling it on. Which brings us on to our next advantage…
  • You don’t have to worry about depreciation
    • Depreciation starts the minute you drive the car.
    • The chances are that if you buy your car, you will suffer a loss when it comes to reselling.
  • You get a new car every few years
    • Why this is a pro is pretty self-explanatory. At the end of your lease agreement you get to trade in your car and get a shiny new one. Easy.
  • You can get a better car for less money
    • Approximately 75% of all luxury cars on the roads in the UK are leased.
    • This is because a lot of luxury cars are generally cheaper to lease than to buy.


So, as you can see, there are quite a few advantages to leasing a car. However, it is not for everyone. There are disadvantages as well and while these are entirely subjective, you should take them into consideration.


The Cons of Leasing a Car


  • You don’t own the car
    • We’ve already covered this, but it can be a deal breaker for many.
  • There are mileage limitations
    • Before you receive your lease car, you will agree to stick to a set amount of miles each year. If you go over this, you will be subject to excess mileage charges. You can find out all about excess mileage here.
  • You are responsible for the payments regardless of your situation
    • If you lose your job or come into financial hardship then you still have to pay the repayments.
    • If you want to get out of your contract early then you’ll be charged an early termination fee. 
  • You could get caught out with hidden costs
    • There are extra costs that come with leasing a car, including;
      • Admin fees
      • Servicing costs
      • Fully comprehensive insurance
      • Excess mileage charges

Find out more about these potential hidden costs here.[vc_single_image image=”4884″ img_size=”article-image”]

How Does Leasing a Car Work?


Okay, so you’ve weighed up the pros and cons, and now you’ve decided that you want to lease your next car. Great! Now, how do you actually go about leasing a car?

Step 1: Do your research

Have a look at what sort of car you would like to lease. Also, think about your budget and don’t forget to take into account the additional costs. The more research you do before you go to a dealership or broker, the less likely you are to end up with a car you don’t want or like.

Step 2: Broker vs. Dealership

Now that you have a rough idea of what you want, decide if you are going to go through a vehicle broker or a dealership? Dealerships are often limited to one type of car, whereas brokers have access to a lot more makes and models. You can download our Ultimate Vehicle Broker guide to find out everything there is to know about vehicle brokers.

Step 3: Decide which broker or dealer to go through

You’ve decided whether you want to go through a broker or a dealership, and now you just have to decide which broker or dealer to go through. This step is vital as it will determine the rest of your leasing experience. For tips and advice on choosing a vehicle broker, read our article.

Step 4: Choose the best deal for you

Even though your vehicle broker or dealer will find the best deal they can for you, the decision is ultimately yours. At the end of the day, only you know what is best for you. So don’t let any salesperson push you into making that decision.

Step 5: Get approved

Now that you’ve decided what car you want, you have to be approved for finance. This means you will be subject to a credit check. This is all to ensure that you will be able to make the monthly payments on time and in full.

Have a bad credit rating? Then fear not, because there is a chance you can still lease a car. You can read our article on leasing with bad credit hereh.

Step 6: Paperwork and delivery

The paperwork part of the leasing process is vital. And also pretty boring, but really important. You can read our guide on what documents you will be singing here. Once all that is done, you now just have to wait for your car to arrive.

Step 7: Pick up your car

The final step is receiving your lease car. Once you have the car, you are responsible for taking care of it. This includes ensuring that you keep it in good condition and get it serviced regularly. Servicing your lease car is vital, and to find out how much servicing your lease car will cost you can read our article here.

You are now free to drive, love and enjoy your lease car. Once the agreement has ended, you hand it back. Then the process starts all over again…


Is Leasing a Car Right For Me?


After all that, how can you determine if leasing is right for you?

If you;

  • Like the idea of having a new car every few years
  • Don’t want to worry about having to dispose of the vehicle
  • Do not want to be a victim of depreciation

Then car leasing could be right for you!

Hopefully, we have covered the basics of car leasing in the UK for you. Of course, this isn’t an exhaustive guide to car leasing, and for more information on everything we’ve covered above you can visit our learning centre

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