Cost of Leasing a Car: What to Expect

(Posted on 30/08/24)

When it comes to leasing, there can be a lot to unpack, especially when it comes to cost. You might be unsure if it is your first lease, what hidden costs there may be, how much you’ll roughly be paying per month, and if it’s affordable for you. Well, this guide can help. Many factors play a role in the cost of a car lease.

The monthly rental payment for your lease car depends on several factors: the vehicle you choose, your annual mileage, the lease length, any customisations, and whether it's for personal or business use. You can also add maintenance as an option. All these details will determine your monthly payment. Car leasing for an average person tends to cost between £100 and £1000 per month.

So, let's break down how monthly payments are calculated and what determines them.

How Monthly Payments Are Calculated

The first factor is what car you choose. All cars have different pricing, so the more expensive the cars are, the more likely the monthly payments will be. For example, if choose  luxury car like  BMW i5 it will likely cost a lot more than a Citroen C3. Due to the value of the cars being very different. This is always the case you can find special offers on vehicles which puts the price down a bit for you so you can get very good value for money, but they won’t drop massively.

But if you do like getting a luxury car you are able to reduce the monthly payments by making a large initial payment which can be up to 12 months upfront monthly payments. Your contract length also has an effect some vehicles may be cheaper over 48 months than say 24 months or you can differ depending on the manufacturer and vehicle.

You are able to add a maintenance package to your monthly payments additionally. This does increase the monthly payments however it can work out to be very cost-effective when it comes to MOT, services and tyres if you have high mileage or a long lease agreement these things are inevitable anyway.

Then you have the mileage of the vehicle which can have a big impact on the cost. Most of the time, the higher the mileage limit you set for your vehicle, the higher your monthly payments will be. This is because more miles reduce the vehicle's value when it's returned to the dealer.

Find a deal here and see how much it could cost you 

Additional Cost

Delivery

For vehicle delivery for the UK, you will find most dealerships offer free delivery within mainland UK. Some dealerships may provide the option to collect the vehicle from a port if you are located off the mainland UK. This service is generally free of charge as well, but it’s a good idea to confirm the details with the dealership if you live outside mainland UK.

Initial Payment

This is the first payment you make for your car, and it makes up the total cost of your lease, no matter how much or little you put upfront you still pay overall the same cost over the course of the lease. The initial payment for your car lease is part of the total cost of the lease and affects how much you pay each month. Regardless of the amount you pay upfront, the total cost of the lease remains the same. The amount of the initial payment is based on the number of months you choose to pay upfront. You are able to tailor the intial payment to suit your budget.

This initial payment will be taken from your bank account 7-10 days after your car is delivered.

For example, if your monthly lease payment is £150 and you decide to pay for 12 months upfront, your initial payment will be £150 x 12, which equals £1,800. Conversely, if you choose to pay for only 6 months upfront, your monthly payment might increase to £180, making the initial payment £180 x 6, which equals £1,080.

Processing Fee

When leasing a vehicle, many brokers do charge a processing fee. This fee covers the administrative work and the handling of your lease deal. Processing fees can vary from broker to broker and may also depend on whether VAT is applied. So, make sure to check this out before hand and avoid any unexpected cost for yourself.

Insurance

Most leasing companies require that you have fully comprehensive insurance for the vehicle, which covers all potential damages and third-party liabilities. Insurance is not included in your lease agreement and must be arranged separately by yourself Additionally, you might consider taking out GAP insurance, which can help cover the cost if your vehicle is written off or stolen.

Regarding maintenance, many new vehicles come with a manufacturer’s warranty, which typically lasts around three years, though this can vary depending on the manufacturer. This warranty covers major mechanical faults that are not your fault, so you won’t have to pay for repairs during the warranty period. After the warranty expires, you’ll be responsible for any repair costs.

As for MOT and servicing, these are not included in the lease and must be paid for separately unless you have an additional maintenance package. Most cars require servicing once a year, and cars over three years old will need an MOT annually as well.

Cancellation fees

Cancellation fees can apply if you cancel a lease early or if you decide to cancel a vehicle order. If you terminate your lease early after delivery, you may be required to pay a termination fee, which is typically 50% of the remaining lease payments.

It’s a good idea to contact your funder directly to discuss the best course of action and to understand any specific terms or conditions related to early termination or cancellation.

End of Lease 

At the end of your lease, there may be fees, but they can be avoided. If you exceed your agreed mileage, you will be charged for each additional mile based on a rate disclosed at the start of your lease- the pence per mile varies vehicle to vehicle. This is why it is important to choose a mileage limit that fits your driving needs.

Wear and tear are normal on any car over time, but each dealer has different policies. When the vehicle is collected, it will be inspected. If any damage exceeds the British Vehicle Rental and Leasing Association’s fair wear and tear guidelines, you may be charged for any repairs.

Learn more the Fair Wear and Tair Policy