How much does it cost to lease a 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.

Initial payment

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.

Monthly Payments

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.

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.

Processing fees

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.

Insurance

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

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.

Excess mileage

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.

How to lease a car?

With leasing, you simply pay a small initial amount, usually equivalent to three monthly payments, at the start of the vehicle lease. Then each month you pay a fixed monthly payment for the term of the agreed lease. You will have an agreed annual mileage allowance for the lease to meet your requirements (Excess mileage charges will apply if you exceed the contract mileage.) At the end of the lease period (typically two or three years), you simply hand the vehicle back. Some methods of funding (not all) allow you to buy the vehicle at the end of the agreement for a final payment if you wish.

If you’re interested in leasing a vehicle, get in touch with us and one of our leasing consultants can talk you through the process in full. Once you’ve decided on your perfect vehicle, our friendly and helpful Administration Team will be on hand to guide you through your journey from signing your paperwork to taking delivery of your new car or van. Leasing a vehicle couldn’t be simpler!

Click here for more information about the steps to leasing a vehicle.

What determines the cost of a lease car?

There are various factors which can determine the cost of a leased car. This includes:

• The cost of the car, also known as On-the-road price.

• The level of discount we get on the car. Take advantage of exclusive car lease deals with some of the UK’s largest finance partners and get a highly competitive rate on your new lease car.

• Your agreed contract terms including the contract length, annual mileage allowance and initial payment. A higher initial payment tends to lower your monthly payments over the contract period.

• The anticipated residual value of the vehicle.

• Whether or not you decide to include an optional maintenance contract for an additional monthly cost.

• Your credit score can impact your lease payments. The better your credit score, the more likely you are to be approved for credit and can access the best lease deals available from a range of finance partners.

Cost of leasing vs. buying

If you usually make price-driven decisions, then here is where things get a little more interesting. With leasing, you are paying for the vehicle's depreciation over the agreed contract term. Whereas when buying a car, you pay for the total value of the car. This means leasing offers the cheaper monthly cost.

Another main benefit of leasing is generally the finance company is going to get more discount on the vehicles than you will ever get. For example, if a car costs £20,000 then the finance company might get the car for £17,000 due to them buying in mass quantity. Therefore, their purchasing power is much stronger than that of an individual, even if the consumer has cash available to make the purchase. This benefits the consumer because it can reduce your monthly payments due to the finance companies’ discounts. If you decide to buy a car instead, you don’t have as much buying power and so the discount won’t be as great.

When buying a vehicle outright, do you ever look ahead and consider how much you will sell it for? Most people would respond ‘no’ to this question. The majority of consumers will mainly focus on the buying price of the car that it will be so far in the back of their mind what the selling price in several years will be. However, with leasing one of the main benefits is that the job of selling the car and picking up the tab for depreciation is the responsibility of the finance company.

Car Leasing FAQs

Here are a few common questions you may have regarding car leasing and the cost to lease a car.

We hope you’ve found this article useful in explaining the cost of leasing a car. For more car leasing guides and news, follow us on Facebook.

Looking for your next lease car? Visit our website to view our latest business car lease deals and personal car lease deals. Also, view GB Vehicle Leasing’s special offers on a wide range of cars.

Do you require a new lease car ASAP? Where possible, GB Vehicle Leasing work hard to secure stock vehicles and offer the very best in stock car lease deals. For our full list of stock cars and to see how we can assist you further, please get in contact with us today on 0161 667 5338.