What is the Cost to Lease a Car?

(Posted on 30/08/24)

When considering car leasing, the cost of leasing a car is one of the most important factors for you to understand.

So, whether you are opting for personal car leasing or business car leasing, there are several factors that influence your monthly repayments, from the new car you choose to how you handle wear and tear.

Consequently, this guide will walk you through what you can expect in terms of your leasing costs and additional charges and how to find the best deal for your exact needs so you understand the cost of your lease as a result.

Table of Contents

• What Determines the Monthly Cost of Leasing a Car?
• How Monthly Payments Are Calculated
• Additional Leasing Costs to Consider
• Maintenance
• Insurance and Leasing
• Early Termination Charges
• What Happens at the End of Your Lease?
• Vehicle Leasing Options
• Key Things to Consider for Leasing a Car
• Special Offers and Leasing Options
• What Are the Benefits of Electric Vehicle Leasing
• Leasing Costs vs Buying
• Peace of Mind with Personal Lease
• Contact us
• Related Leasing Guides
• Who Are We at FleetSauce?

What Determines the Monthly Cost of Leasing a Car?

The monthly rental or monthly cost for a lease vehicle is determined by several factors, such as for instance:

Vehicle Selection

The type of car you choose greatly affects your payments.

For example, a luxury model like a Land Rover lease or a Jaguar lease deal will have higher lease payments than say a smaller city car like a Volkswagen Golf lease or a Nissan Qashqai lease would for instance.

Contract Length

The contract term you pick also plays a key role.

For instance, a longer lease term, such as 48 months, can often reduce your monthly instalments compared to a shorter lease of 24 months for the same car.

Annual Mileage

The annual mileage you pick also significantly affects the cost.

For instance, leasing companies set an annual mileage allowance (e.g., 10,000 miles per year), and exceeding this can result in you getting charged for excess mileage at the end of your lease, which is in part due to the increased depreciation the additional miles have cost the leasing company.

Initial Payment

Car lease agreements also require an initial payment (or upfront payment), which can be tailored to your budget.

The more you pay upfront, the lower your monthly fee / repayments will also be, as well.

Wear and Tear

Normal wear and tear are to be expected, but if the car returns damaged beyond the fair wear guidelines set out by the BVRLA, you may face additional charges.

Maintenance Package

Adding a maintenance package to your lease agreement can also cover routine services like MOT, tyre replacements, full servicing requirements, and repairs for the full term of the contract, potentially saving you money in the long run as well.

How Monthly Payments Are Calculated

The lease payments for a brand-new car are based on the vehicle's cost (after discounts), road fund license/luxury vehicle tax (if applicable) and the estimated value of the vehicle at the end of the contract (Mileage and term will calculate this value).

Example payments

To give you an idea, the monthly payments for leasing a stock car can range between £100 to £1000, depending on the contract length, the number of miles you drive, and other variables.

Then, for more luxury brands like Cupra Formentor lease or a BMW lease these would typically command much higher monthly rentals - while other family options such as a Vauxhall Corsa or a Toyota Aygo are more budget-friendly options for you to choose from for instance.

Additional Leasing Costs to Consider

While car lease costs are generally predictable, there are a few additional charges you should also consider, such as:

Insurance

Most leasing companies require that you have comprehensive insurance in place for your leased vehicle.

Additionally, you may want to also consider GAP insurance - which covers the difference between what the insurer pays and the car’s remaining lease value in the event of a total loss as well.

Processing Fee

A processing fee - or admin fees - are often charged by leasing brokers to cover administrative costs.

End of Lease Charges

At the end of your lease, there may be damage charges if the car doesn’t meet the fair wear guidelines or if you've exceeded your mileage limit as well.

Excess Mileage Charges

If you exceed the agreed annual mileage allowance, you will also be liable for excess mileage charges at a pre-determined rate per mile that is set out in your contract.

To avoid these, it is important to select a mileage limit that reflects your driving habits before you take out your lease as well.

Maintenance

Your lease payments also won’t include car insurance or maintenance costs - unless you opt more for a maintenance package then some of these can be covered.

For instance, this package can then cover essentials like routine maintenance, MOT, and breakdowns, which then provide you with peace of mind and save you from unexpected expenses as a result.

We also find that many people discover that electric vehicles come with fewer maintenance needs, as they have fewer moving parts than traditional petrol or diesel engines.

However, you should make sure that your maintenance package covers everything you need - especially if you are covering long distances or your lease term extends beyond the warranty period as well.

What Happens at the End of Your Lease?

At the end of your lease, the leased car is then inspected by a representative of the finance company on return to BVRLA standards.

If you have taken care of the car over the lease and stayed within your mileage allowance, you should have no issues.

However, excess mileage charges and wear and tear beyond the agreed standards can add additional costs at the end of your contract term that you should be aware of.

If the car is then returned in good condition, as outlined by the fair wear and tear guidelines, you should avoid any damage charges.

It is also important to maintain the car well and ensure any issues are addressed quickly during your lease term as well.

Opting for a maintenance package here can help you with this, as this can help to ensure that regular servicing and repairs are taken care of during your lease period.

Vehicle Leasing Options

When considering vehicle leasing, there are various options to suit both personal and business needs.

Let’s break down the key leasing types down so you understand them better.

Personal Contract Hire (PCH)

This is the most common type of personal car leasing.

Under a PCH agreement, you pay fixed monthly instalments for a brand-new vehicle, and then, at the end of your lease term, you return the vehicle with no option to purchase it.

This option is great if you prefer to drive the latest models every few years.

Business Car Leasing

For businesses, leasing can be a cost-effective way to manage company vehicles.

This is due to the fact that business lease agreements typically offer you special offers and discounts for multiple cars, as well as fleet management services.

Additionally, the lease payments can also be tax-deductible depending on the business's VAT status as well as claimed as a business expense.

Key Things to Consider for Leasing a Car

There are a few things you should consider when leasing a car. For instance, these can include:

Initial Rental Payment

As mentioned earlier, your initial rental payment can be customised based on your budget.

This is usually a multiple of the monthly payments, such as 1, 3, 6, or 12 months paid upfront.

While a higher upfront payment lowers the monthly cost, the total cost of the lease remains the same regardless of how much you pay upfront.

Credit Check

Leasing a car involves a credit check / review of your credit history by the finance provider / leasing company, along with you proving who you are, normally via documents such as your driving licence, for instance.

A good credit score will then help you get better lease deals and potentially lower rates as well.

However, if you have bad credit, you may face higher costs, or you might even need to provide a larger upfront payment to secure the lease as well.

Annual Mileage Limit

It is essential to choose a mileage limit that suits your driving habits when you take out your lease.

You should note that excess mileage charges can add up if you underestimate your annual mileage when you take the lease out, so you want to be realistic about your needs.

End of the Contract

At the end of your rental agreement, your car will be collected, and you can either sign a new lease for another brand-new car or explore other options.

If you're returning a vehicle, as stated above, you want to ensure it adheres to the fair wear standards to avoid penalties for damage that is not covered.

The Leasing Process

The car leasing process is really straightforward.

Once you choose your new lease car, we will handle most of the paperwork, including arranging road tax and free delivery.

In most cases, delivery is free within the mainland UK, which will provide you with an extra level of added convenience for our customers as a result.

Insurance and Leasing

When it comes to insurance on a lease car, you will typically need to arrange your own insurance for a leased car, just as you would for a brand-new vehicle you purchase.

The main difference, though, is that the leasing company or car dealership, not you, will be listed as the car's registered owner.

Early Termination Charges

An early termination fee can typically be charged if you end your lease early, usually as a lump sum. This fee is often around 90% of your remaining payments, but it can vary by lease, so it's essential to review the terms you sign carefully as it will be listed in there for you.

Special Offers and Leasing Options

Leasing, as you can see, offers you a lot of flexibility, allowing you to drive the latest models without worrying about depreciation or selling the vehicle later.

We also can offer many special offers, particularly on in-stock vehicles or electric cars, making it easier to find a stock car that fits your budget. These special offers also tend to come with special limited-time pricing, saving you money by taking them out when they are available.

Additionally, leasing provides options like Van Leasing as well, which is especially if you need a vehicle for business purposes.

What Are The Benefits of Electric Vehicle Leasing

Leasing an Electric Vehicle (EV) comes with its own set of advantages as well, cost-wise, thanks to its fuel type - which can get you government incentives for leasing one as well.

EVs, for instance, tend to have lower running costs compared to petrol or diesel vehicles, as they are exempt from road tax and require less maintenance as well.

Charging an EV is also more cost-effective than filling a fuel tank, especially if you have a home charging point, and it can save you a lot of money each month when refuelling it.

Leasing Costs vs Buying

For those considering whether to lease or buy, car leasing costs can often be lower compared to traditional financing.

For instance, by leasing, you avoid large upfront costs and the hassle of selling a used car later on.

Instead, you simply return the vehicle at the end of your lease and can upgrade to a brand-new car with the latest features.

This then makes leasing a very attractive option for those who like to drive the latest models without long-term commitments at very cost affordable rates as well.

Peace of Mind with Leasing

As you can see, leasing a car offers you peace of mind, knowing that you will be driving a brand-new vehicle under warranty, reducing the risk of unexpected repair bills.

Then, with options like breakdown cover, GAP insurance, optional extras, and a maintenance package, you can enjoy stress-free motoring without the usual concerns that come with owning a car outright.

Contact us

So, whether you are looking for the best car lease deals, a longer lease term for a Nissan Qashqai, or a luxury option like a Land Rover, leasing really does offer you a wide range of options for every type of driver.

So if you feel this is right for you, contact our leasing team today, and we will be happy to discuss your options with you. We are here to help.

You can also check out some of our other guides to help you find out how car leasing works for instance.

Related Leasing Guides

If you liked this guide to the cost of car leasing, you may like some of our others, such as for instance:

• What is an initial rental for Car Leasing?
• Electric and Hybrid Car Lease Guide - The Ultimate Guide From How EV Leasing Works, Your Options & More

Who Are We at FleetSauce?

Here at FleetSauce, we are a large team of leasing experts and customer service professionals based in Wrexham, Wales.

We specialise not only in new car lease deals but also in van leasing and car leasing.

As a result, our team constantly reviews the electric car market to bring you the best prices, and we can also manage significant business leasing contracts and fleet solutions as well.

Furthermore, we pride ourselves on our excellent customer service — check out our customer reviews or visit our leasing guides to learn more about leasing new vehicles for instance - we are here to help you after all.

For our credentials, we are a credit broker and finance company that is authorised and regulated by the Financial Conduct Authority (FCA) - registration number 676763 - and a member of the British Vehicle Rental and Leasing Association (BVRLA) as well.

Our registered office is located at FleetSauce Ltd, Ellkat House, Coed Aben Road, Wrexham Industrial Estate, Wrexham. LL13 9UH, and we are registered in England & Wales - company no 07281366 - and our BVRLA membership number is 10818 if you need it.