What is Car Leasing?


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By Grace Hickman

on Wednesday 28 March 2018


When looking to get a new car, there are various ways to finance it. Generally, people will opt to buy, but more and more drivers are considering a leasing contract.

So what does it mean to lease a car?

Leasing involves signing up to a financial contract in which you pay an agreed monthly amount in exchange for the car you want. Depending on the type of contract you’d prefer, there are a number of leasing options and car finance deals you can choose from (see below).

Man handing over car keys

During the contract, whether it’s a long-term or short-term lease, the finance company will remain the legal owners of the car. Once the agreed term ends, you hand the car back to the owner and you are able to take out a contract on a new one. If you wish to keep the car, you can buy it off them with a balloon payment – this depends on the terms of the contract you choose.

To lease a car, you need a full UK driver’s license and you will need to pass an external credit approval.

At Complete Leasing, we can help find you the car that you want and the contract that best suits your needs.

What are the Advantages of Leasing a Car in the UK?

Many people are unsure when making the decision to lease or buy a car – which option is more suitable and more affordable?

The main reason more people are choosing to lease a car is that it offers a more affordable option of driving a new car every two to three years. When it comes to leasing vs buying, the monthly cost is the main difference.

The reason why leasing is likely to cost less per month is that the car’s depreciation is taken into consideration: with time, the car’s value will decrease due to wear and tear, and of course, age.

Some other advantages of leasing are:

  • You’re able to drive a brand new car of your choice with minimum hassle.

  • Lower upfront costs and monthly payments – getting a more expensive car is affordable.

  • Warranty cover.

  • MOT and road tax are both paid for.

  • You have the option to return the car or keep it at the end of the contract.

  • You can get a brand new model every two to three years.

  • Fixed monthly payments - you always know where you stand financially.

Are There Any Cons?

There are minimal drawbacks when it comes to leasing:

  • You don’t own the car throughout the agreed term - it is never really ‘yours’.
  • If you go over the agreed mileage limit, you will face charges.
  • It is difficult and can be expensive to cancel your lease contract.

Generally though, there are more pros than cons when it comes to leasing. As long as you take care of the car as best as you can and keep an eye on the number of miles you’re covering, you won’t be faced with any extra costs.

The Different Ways to Finance a Car

There are three main ways of financing your car on a leasing contract.

Personal Contract Purchase (PCP)

PCP car finance is the most popular way to finance a new car, as it provides you with the flexibility of having three options at the end of the contract:

  1. You can buy the car by paying a final balloon payment.
  2. You are free to simply give the car back to the finance company with no other payments.
  3. If you’d like another new car, you can part-exchange it for another new model.

Rather than paying off the entire value of the car, with PCP you are paying off the depreciation of the car in monthly instalments.

Essentially, you are paying the difference between the value of the car now (at the start of the contract) and the value it is predicted to be at the end of the term – so this type of contract can be more cost effective for you.

For more information on how PCP works in more detail, see our article here, or contact us today to find out more about your options and the best PCP deals available.

Hire Purchase (HP)

With HP, your monthly instalments are paying off the entire value of the car, meaning your monthly payments will be higher, plus you will have to pay an initial deposit at the start of the contract (as with all leasing contracts).

Once you’ve paid everything off and you've settled the contract, the car is yours! It is a great way to eventually own a car that you might have been unable to buy outright initially.

You can cover as many miles as you want - the finance company will not ask to agree on a mileage limit at the start of the contract, so you won’t be charged for exceeding any limit – unlike with a PCP or PCH contract (see below).

You must make sure that you keep hold of the car and that it is insured and maintained until everything is paid off. For more detail on what a hire purchase agreement is, see our page here or give us a call today.

Personal Contract Hire (PCH)

This type of contract is more of a long-term rental agreement and is designed for those who do not wish to buy the car at the end. There are no options available for you as there are with a PCP contract.

You will be responsible for paying an initial deposit and monthly payments over a fixed period. Then once the contract ends, you simply return the car. The installments work out a lot cheaper than if you were to buy the car.

This contract is generally similar to PCP, but people usually choose PCP due to the flexibility – it is easy to change your mind throughout the contract, so many people prefer to have the options.

For further information on what personal contract hire is, read our article here. Or if you would like to know more about PCH deals that are available for you, contact us today!

Car Leasing Deals with Complete Leasing

If you wish to cancel or change your terms during the contract, you are likely to be faced with high charges or you may not be allowed to cancel it at all, depending on the contract, so it’s important you make sure you get the right car for you and the right leasing contract. At Complete leasing, we can help you with all of this and find you the best car hire purchase deals.

Car leasing online can be challenging and complicated, as there are so many options and different prices available - call us today and we’ll do a car lease comparison for you, along with anything else. Finding you the car you want and the best car finance deal suited to your needs is our speciality!

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Complete Leasing will find the best deal for you – get in touch with us today!