What Is The Average Car Lease Length?

There’s always a limit to how long you can lease a car for, but different types of drivers will benefit from longer or shorter contract lengths. You can usually choose to have a leased car for 24, 36 or 48 months, with a 36-month deal being the average term.

Depending on your preference and budget, one type of contract will suit you over the others. Read on to find out which duration works best for you when leasing a car.

What is a lease term?

car lease term

A lease term is the total amount of time that you will spend with a car you have leased from a provider. Depending on who leases you the car, it may also be described as ‘contract length’. The time will either be displayed in months or years – for example, one company may say ’36 months’, another ‘3 years’.

Sometimes, a provider may choose to display a numeric summary of each deal’s length, with the initial payment included. In this case, a 24-month contract with three months initial payment would be shown as ‘3+24’, or a 36-month term with one month upfront ‘1+36’. This is what’s known as a ‘payment plan’ and is used to show you what is being paid and for how long.

Which type of term should I choose?

People lease cars for many different reasons, but most of the time it’s because, for affordable monthly payments, you can get behind the wheel of a brand-new car every few years. At the end of the contract, the car is taken off your hands with nothing more to pay, provided it isn’t damaged and you’ve stuck to the agreed mileage.

In this instance, leasing is essentially long-term vehicle rental and a term which is three years or less is one of the most popular options, and here’s why.

what is leasing a car

Short-term leasing

Although short-term lease agreements aren’t what the average person would choose, there are circumstances whereby it can come in handy.

Certain providers are now offering vehicles with contract terms as little as three, six, nine or 12 months. The idea is to outprice the competition from hire companies which have for so long specialised in offering immediate, flexible access to a car or van.

This can be useful if you’ve had a sudden change of circumstances, such as a job or house relocation, and need a car without long-term commitment. It may also be an option if your current motor has a problem and needs to go in for repair.

Delivery will be quicker than that of a standard 2-3-year agreement, often taking less than two weeks. However, it isn’t a solution to a longer contract (e.g. if you planned to take out several six-month deals) as monthly payments will be higher, costing you more.

2-3 years

Most providers will offer two years as the shortest car lease length because, as the owner and registered keeper, they lose a large chunk (around 40%) of each vehicle’s value in the first year of it being driven. Although the monthly payments will be more expensive to cover this depreciation, it’s often too short a time to recycle the vehicle afterwards into used car finance offers, such as PCP (Personal Contract Purchase).

As such, a deal which lasts 2-3 years is much more attractive to the person who is leasing. Not only are the monthly rentals cheaper, thanks to them being more spread out, but you will also reap the most benefits from the manufacturer’s warranty.

A standard warranty will last three years or 60,000 miles (whichever comes first), which means any mechanical or electric faults not caused by driver error will be covered for the duration of the agreement.

What’s more is that a new car which is less than three years old won’t require an MOT by law. Even if you chose a three-year deal, it won’t be your responsibility to pay for the vehicle to be tested and serviced at an approved garage.

Long-term leasing

On the opposite end of the spectrum, you may like having a car for as long as four years – the typical maximum limit for a lease contract.

Long-term leases offers similar perks to vehicle ownership, such as having a vehicle you want for a longer period, but without the hassle of needing to sell it afterwards.

The monthly payments, which make up the bulk of a lease, will be cheapest if you choose this type of deal too. So, if you have your heart set on a certain car, but your budget doesn’t allow you to stretch to a shorter contract, you may find spreading the cost this way works better for you.

An additional cost you’ll need to factor into long-term leasing is the cost of an MOT, which is around £60. Also, any servicing that needs doing as a result of the MOT will need to be arranged and paid for by you too.

For complete cover for routine servicing and the cost of an MOT, it’s worth considering a maintenance package for your vehicle. This will be offered at a fixed monthly price, which will either be added to your rental payments or as a separate cost.

You can find out more about leasing maintenance packages in our other guide here.

What contract length should I choose?

In order to come to a decision about how long you should have a leased car for, we recommend doing two things.

1. Check the monthly payments fit your budget

As we mentioned earlier, each different lease term will require either a higher or lower monthly rental payment.

After factoring in the initial payment, be sure to look at your available funds for each month and decide which option you can afford.

Remember: Missed or failed payments will negatively impact your credit score and can result in your vehicle being repossessed.

With a longer lease agreement (e.g. more than three years) you’ll need to factor in the cost of an MOT and have enough rainy day funds put aside for any potential damage deemed beyond fair wear and tear. Alternatively, it may be worth considering a maintenance package if you want to keep the costs of the vehicle predictable.

2. Consider how you will use the car

driving away

If you haven’t already got a car and want a reliable new car every few years, then a standard 2-3 agreement will give you everything you need. There’s even high mileage options which let you drive the car 25,000 miles per year – a handy option if you do a lot of miles for work.

Speaking of driving for work, it may be that you qualify for business leasing, in which case a short-term arrangement won’t be as expensive. This is because the monthly rentals will be exempt from VAT charges. However, if you use the vehicle for personal journeys, you’ll need to make a record of all these miles, they will then be subject to the standard VAT cost.

To find out if a business lease is right for you, check out our other guide for everything you need to know about Business Contract Hire here.

Alternatively, you may only need a car for a few months, such as if your existing motor is off the road needing repairs. In this case, consider short-term leasing as a cheaper alternative to regular car rental, which will often charge by the day and will work out more expensive.

Finally, if you want a bit more time with your new car and want the cheapest possible monthly payments, you may be best considering a four-year contract. These are easier to come by than shorter agreements too, with most providers offering them.

Ready to configure your ideal new car, with contract terms that suit you? Then start your search now to get prices in minutes on our latest lease deals.

For more information on leasing, head over to our guides page.

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