What Is Car Leasing?

• What is the leasing process?
• Will I ever own the car?
• How long does a lease agreement last?
• What do I have to pay for when leasing?
• Are lease cars new?
• What about day-to-day maintenance?
• Who is eligible?
• Leasing vs PCP
• What happens at the end of a car lease?
• First time car leasing tips

Car leasing is a form of finance which allows you to hire a brand-new vehicle for a period of time, known as the ‘lease term’. As the leasee you are responsible for insurance costs and keeping the car running, but you will never own it.

What is the leasing process?

There are just three simple steps you need to follow to lease a new car from Moneyshake. These are:

1. Decide on the make and model of your car, or search by your monthly budget.
2. Choose how long you want the car for, the miles you’ll drive each year and how much you want to pay upfront.
3. Pick a deal which is right for you and arrange for delivery of your new car with the provider.

Will I ever own the car?

In short, no. The beauty of leasing a car is that at no point do you own the car. This is down to the finance provider who you pay on a monthly basis to hire the vehicle.

How long does a lease agreement last?

Typically, a contract will last anywhere from two to four years. But the great thing is that the choice is yours!

If you want a car for a year or five years, there’s the option out there to go with short and long-term deals.

What do I have to pay for when leasing?

Your payments can be broken down into the following:

• Monthly payments you make across the length of your term cover the depreciation of the vehicle’s value. A car is estimated to lose around 50% (potentially even more) of its value after three years. Bear in mind that three years is the most popular contract term!
• Aside from your monthly rentals, you’ll also have an initial payment to put down. The amount you choose is calculated in months that equate to your hire price.
• For example, you could choose to put down three months’ initial payment on a deal which costs you £170 per month. In this case, would pay £510 upfront.
• You may be charged an admin fee for certain offers, depending on the provider the deal is from. This will be around £100 and goes towards processing cost.
• Insurance is not included within your monthly payments. You must arrange to be insured and the finance provider will specify this has to be a fully comprehensive policy.

Depending on the leasing company and provider you get your new car from, you may be presented with a summary of your chosen deal’s payments. This is known as a ‘payment profile’.

For example, if you chose to pay three months upfront for your new car on a 36-month contract, your payment profile would be 3+36.

The first number represents your upfront payment, while the second is how many remaining months you have to pay.

Are lease cars new?

All lease cars are brand-new, which means you’re covered by the manufacturer’s warranty throughout the duration of your contract. So, the chances of you experiencing mechanical faults or breaking down in your new car are very unlikely.

Because the vehicle is new, you won’t be responsible for booking it in for an MOT, so long as your deal is three years or less. However, if you choose to have the car for four or five years, it’s your responsibility to get an MOT at a garage approved by the finance provider. You’ll have to check this with them as and when the time comes and pay for any repair costs.

What about day-to-day maintenance?

Common sense dictates that while the car isn’t technically yours, you still ought to look after it as though it was. Your life is made easier by doing so because the finance provider won’t whack you with a huge bill for damage when you hand the keys back.

Here’s how you can easily maintain your lease car:

• Regularly fuel your car.
• Check your tyre pressure before longer journeys.
• Measure your engine oil level every 3,000-7,000 miles and top it up if needed.

Who is eligible?

There are just three criteria which you need to meet:

1. Be aged 18 years or older.
2. Hold a full UK valid driving licence.
3. Be able to pass a credit check from the provider in order to make sure you can afford the monthly payments.

The reason you must be at least 18 years old before being approved is because people younger than this tend not to have a form of credit history for providers to work with.

However, adulthood brings with it extra financial responsibilities such as phone contracts and other direct debits that then build this score.

Leasing vs PCP

The key difference between car leasing and PCP (Personal Contract Purchase) deals is that PCP gives you the option to purchase the car at the end of the contract. This is known as a ‘balloon payment’, which the finance provider calculates for the car in question at the beginning of every deal.

The provider will assess the current market and how the vehicle in question performs in it before generating a GMFV (Guaranteed Minimum Future Value) of the car.

Once your contract is up, you can choose to pay this lump sum and own the motor or hand the keys back and take out a new contract for another car.

What happens at the end of a car lease?

A few weeks before the end of your contract you’ll need to arrange for a collection date and time with your provider. This way you can get the car back on time and avoid being charged for overrunning your agreement.

In addition to collection, the finance provider will perform an inspection of the vehicle. Don’t worry, you won’t be punished for any wear and tear as a result of regular use.

However, it’s worth remembering that any damage which goes beyond the BVRLA’s (British Vehicle Rental and Leasing Association) recommended guidelines will lead to an extra charge.

First time car leasing tips

Before you get behind the wheel of your new car, there’s a few useful tips to be aware of so that you can get the most out of your experience.

Here are Moneyshake’s six top tips for first time leasing:

• Budget for the upfront payment, monthly payments, admin fee (if the provider has one) insurance and running costs before committing to a contract.
• Calculate your annual mileage by multiplying your weekly miles by 52. This will give you an accurate reflection of which option to choose for your deal, this way you won’t overspend on miles which you don’t use or receive an excess mileage charge for going over your agreed limit.
• Pay as much upfront on the vehicle as you can afford. This way your monthly payments, which make up the bulk of your agreement, will be cheaper.
• Check for any special offers available to bring your price down even more.
• Maintain the condition of your new car to avoid extra charges (see our maintenance best practices above).