How much does it cost to lease a car?
Monthly car lease costs in the UK can range from an affordable £170pm all the way up to £2000pm (or more!) for some of the more luxurious car models.
However, these monthly payments won’t be the only money you spend on your lease deal. There are also other costs to factor in, such as the initial payment, the broker’s processing fees, and that all-important insurance cover.
At Leap Vehicle Leasing, we think it’s important to understand all the costs involved in leasing a car before you start the process – so there are no nasty surprises along the way!
This guide will help you understand the financial side of your car leasing. We’ll break down the total cost of your lease deal, examine the differences between personal contract hire (PCH) and business leasing, and provide you with valuable insights so you can make the best car lease choices for your budget.
Car Leasing: Breaking down the costs
Car leasing is, essentially, a rental agreement. You enter into a contract with a finance company and agree to pay a certain amount of money over a specific length of time, to drive a new car for a set period (usually two or three years). At the end of your lease period, you must return the car.
Read our guide: What is car leasing?
The cost of leasing a car will vary depending on various factors and it’s important to understand exactly what you’ll be paying for, to ensure you stay within your budget..
There are five main leasing costs to consider when shopping for a new lease deal:
1. Monthly payments
Your monthly payments are calculated at the beginning of your leasing contract to include depreciation, interest charges and taxes. The amount will vary depending on factors like your initial payment amount, the vehicle model, and your contract length. The first payment will be taken the month after you receive your lease car and continue until the end of your lease period – these are paid directly to the finance company.
2. Initial payment
Just before or after you receive your lease car, you will pay an agreed initial payment (also known as a ‘down payment’) to the finance company. This lump sum is non-refundable and can be anything from £1000 to £18000+, depending on your choice of car and agreed monthly payments.
Read more about Initial Payments in Car Leasing.
3. Processing fees
Leap Vehicle Leasing is a credit broker – which means we work hard to bring you the very best car lease deals available! We’ll also take you through the process of applying for finance, order your car for you, and ensure it’s safely delivered to your door. We charge a single, upfront, processing fee for this service: £250 + VAT. This payment is due when we place the order for your vehicle.
Learn more in our guide to Car Leases and Credit Rating.
4. Insurance
Insurance coverage is an additional leasing cost to consider. It’s up to you to insure your lease car. It’s best to have it in place before your car is delivered, to ensure you’re covered right from the start. The price for insurance will vary depending on the vehicle's value, your driving record, and other factors such as where you intend to park the car overnight.
5. Maintenance
Proper maintenance is essential to ensure your car stays in tip-top condition throughout your lease period. Whether you choose to add a manufacturer’s Maintenance Package to your car lease contract or simply book in at your local garage when you need to, you should factor the costs for routine servicing and potential repairs into your leasing budget.
Factors that influence your monthly car lease costs
We’ve mentioned that there are multiple factors that can affect the monthly price you pay for your lease deal. These can include:
Vehicle model and trim level
Let’s start with the basics. Your leasing costs will vary depending on the type of car and features you choose. Consider your needs, priorities and budget when choosing your vehicle model. Luxury upgrades, advanced tech, and hybrid/electric models will all lead to higher monthly payments.
Lease term
Your contract length is a key part of calculating how much it costs to lease a car. Generally, longer lease terms benefit from lower monthly payments. However, it's important to weigh the advantages of this against your personal circumstances as shorter lease durations offer more flexibility.
Initial payment
Similar to a mortgage deposit, the amount you put down for your initial payment will directly impact your monthly car leasing costs. If you prefer to make smaller monthly payments, you can put down a higher upfront payment. On the other hand, if you’d prefer a lower initial payment, you’ll have to make sure you can manage the higher monthly cost.
Learn more in our Guide to Car Leasing: Initial Payments
Mileage allowance
Your mileage allowance is the pre-agreed, maximum number of miles you can drive in your lease period. The higher mileage allowance you need – the higher your monthly costs will be. Things to consider when calculating your mileage include: your commuting distance, travel requirements, and any long trips you might take. It’s essential to estimate your mileage needs accurately, as exceeding the limit will result in an excess mileage charge.
Why is business leasing cheaper than a personal lease deal?
If you’ve been browsing our car leasing deals, you may have noticed that business leasing often looks much cheaper compared to personal leases. There are a few reasons for this, but the main one is that business leasing benefits from certain tax advantages and incentives that unfortunately aren’t available to individual consumers.
Companies and sole traders can often claim tax deductions on their lease payments – up to 100% on VAT – resulting in reduced overall costs. Big businesses are also often able to negotiate better lease deals if they’re leasing a fleet of cars.
Learn more: How does business car leasing work?
Find the best car lease deals with Leap Vehicle Leasing
Leap Vehicle Leasing are here to guide you through the car leasing process and help you find the best leasing options for your budget.
Call our friendly sales team today to request a personalised quote: 0161 623 2891.
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