What are the costs of running a lease car?
Whether you buy a car outright or opt for a lease car, there’s running costs to consider. With car leasing, it's not only the monthly payments you should consider as your car leasing costs. Therefore, this article explains the cost to lease a car, including potential expenses above your monthly payments which you need to budget for during the lease agreement.
With leasing, you pay a small initial amount, known as an initial payment, at the start of the vehicle lease. Usually this is equivalent to three, six or nine monthly payments of your lease. When you select a lease deal, it will be structured something like 6+47. In this example the ‘6’ means 6 payments in advance and the ‘47’ is the number of monthly payments you will make following this. The more you pay in advance as the initial payment, the lower the subsequent monthly payments will be. Most finance companies take your initial payment around 7-10 days after delivery of your new vehicle.
At GB Vehicle Leasing, we can make part-exchanging your old vehicle for a new lease vehicle simple and straightforward. By part-exchanging, you may choose to use any equity (due back to you) for your old vehicle as part of or all of your initial payment for the new lease. GB Vehicle Leasing are one of the very few brokers that will accept a part exchange and have access to the whole trader network in the UK. If you have any further questions about part-exchanging your old car, please call us on 0161 667 5338.
Each month, you will pay a fixed monthly payment for the term of the agreed lease. Your monthly payment will depend on a number of factors such as the contract term and vehicle you choose to lease. As mentioned above, by paying a bigger initial rental at the start, your subsequent monthly payments will be lower. Our car leasing consultants at GB Vehicle Leasing are always happy to discuss this with you in more detail, although ultimately this is your financial decision to make (subject to credit approval).
Put simply, your monthly payment covers the expected depreciation of the car during your contract term. The finance company takes the risk of estimating the car’s depreciation and they have the job of selling the car at the end of your contract.
On our website, we advertise both business lease deals and personal lease deals. The main difference is that you pay VAT on a personal car lease, whereas a VAT registered business can benefit from tax breaks on a business car lease. This means you’ll be able to claim 50% of the VAT back on your initial and monthly payments for the car lease. If you can prove the lease car is used only for business use, then 100% VAT can be reclaimed. Also, 100% of the VAT for any maintenance payment is reclaimable.
All car lease deals (unless otherwise specified) will have a one-off processing fee applied. The processing fee is taken by the broker as a fee for the work they carry out on your behalf to source the car. Like with the monthly payments, our processing fee for personal lease deals inc. VAT, meanwhile for business lease deals it exc VAT. As a reputable leasing broker, we offer the highest levels of service with a focus on professionalism and integrity.
Maintenance and servicing
When thinking about the cost to lease a car, it’s also important to consider the whole life cost of maintaining and servicing it. All lease vehicles need to be serviced/maintained in relation to the manufacturer's guidelines. That said, have you considered a maintenance contract? Well, for a fixed monthly fee, a maintenance contract ensures the vehicle’s servicing, maintenance and MOT testing costs will be covered for the duration of the contract. Of course, there's no obligation to opt for a maintenance package with your new lease car. We simply want to ensure all our customers are aware of their options so they can make an informed decision. Our leasing consultants are more than happy to provide you with a quote for a full maintenance contract on your lease car.
The main benefits of a maintenance contract include:
Easy one call / click booking process.
Planned fixed-cost budgeting (the package is tailored to your mileage and contract length).
Lower overall vehicle running costs.
Peace of mind – no unexpected maintenance costs.
Your maintenance package will extend the warranty should your warranty expire.
You may ask, “do the lease deals advertised on your website include insurance?” but the simply answer is no. Insurance is not included as part of your lease contract, so you are responsible for ensuring the vehicle is comprehensively insured. A fully comprehensive insurance policy covers any injury or damage to the other person and their car, as well as any damage to your lease car. The insurance needs to be in place before delivery of the vehicle can be arranged.
If you’re a new or young driver, you’re likely to experience higher insurance costs until you can build up your no claims. Can you relate to this? Well, here are some useful car insurance tips for you. Follow these tips and hopefully you'll be able to save yourself a good amount of money.
Extended Manufacturer’s Warranty
All lease vehicles come with a full UK manufacturer's warranty. Although, the length of the warranty varies depending on the manufacturer. Therefore, if your lease agreement will be longer than the standard manufacturer’s warranty, or your mileage is more than the warranty covers, an extended manufacturer's warranty is worth considering. This isn’t essential and it’s up to you to arrange if you feel necessary to acquire.
Fuel expenses are not included in your monthly payment, so this definitely needs budgeting for as car leasing costs. Once upon a time, the average ‘pump’ price was plausible at under 100p per litre. But fast-forward to now, and the price is considerably higher. With the rising cost of fuel, many customers are considering electric car leasing. Although you’re still required to pay for charging your electric car, this tends to be much cheaper than petrol or diesel. Electric car leasing offers an affordable and hassle-free way to enjoy all the benefits of owning an electric car without some of the downsides. If you’re unsure whether an electric car is ideal for you, please click here or speak to one of our EV specialists.
Repair costs/ Wear and tear
As part of your contract, you’re expected to return the vehicle at the end of the lease in a respectable condition. You will be provided with a BVRLA (British Vehicle Rental and Leasing Association) fair wear and tear guide which explains what is considered as respectable condition. Of course, it’s expected that some natural wear and tear of the car will occur throughout the contract due to normal use of the vehicle. However, please note, you may be charged for any damage outside the BVRLA Fair Wear & Tear Guide upon return of the car. To avoid any potential costs, you could consider getting the damage repaired before handing back the car.
As mentioned, you will have an agreed annual mileage allowance for the lease to meet your requirements. We have car lease deals available with mileages from 5,000 to 50,000 per annum. If you decide to lease, you need to be aware that excess mileage charges will apply if you exceed the contract mileage. This is calculated on a pence per mile basis and will be stated in the contract you sign. It’s worth knowing that, although it is labelled 'annual mileage', your mileage allowance is actually combined together for the contract term. This means that if you have a 4-year contract with 10,000 miles per annum, you essentially have 40,000 miles to use over all 4 years, split between the years however you like.