There is no shortage of options these days in how you can choose how to pay for a car, and leasing has been on the up for a number of years.  What is causing the growth in the leasing market and what are the positive and negative points to leasing your car or van?

Leasing is also known as contract hire, either personal (PCH) or business (BCH).  Contract hire is very similar to Contract Purchase in the sense that both require you to pay something in advance, normally (but not exclusively) followed by a number of equal payments which is partly determined by your chosen mileage allowance.  The main difference is that with contract hire or PCH, you are entering into a non-ownership financial product whereby you simply return the car in exchange for a new one, or return the car and go your separate ways.

Advantages of Leasing a Car

Leasing your new car might just be the best way for you to drive away in a brand new car with the tax, warranty and maintenance included.  Here are some top reasons why leasing is great

Low and predictable monthly costs

The cost of leasing a car or van is generally lower than other methods of financing a new car, as you are agreeing to a long term rental.  The initial payment and monthly payments are fixed, so you can budget accurately for a number of years in advance.  Lease deals are available as short as 18 months, with a maximum of 5 years.  

Flexible set up options

Choosing the make and model is an obvious place you would want to start, but if you are ordering in advance then you can choose the exact colour, factory or dealer fit options and when the car is to arrive.  Once you have this nailed, the initial payment, contract length and annual mileage is entirely bespoke to your needs - so you only pay for what's right.

Cheap Maintenance with your lease

When you lease a car or a van, you can add maintenance to the contract.  This optional cost then forms part of your monthly payment and when your service is due or you need tyres, you can have the work carried out at main dealer without picking up the bill.  This allows you to better forecast the cost of running the car and enables you to benefit from a lower rate than if you were to book with the dealer directly (Imagine never having to scrutinise maintenance costs at a main dealer 😁).  To make it even better, many lenders offer a small discount on the finance element of your lease when taking a service pack - This is because it almost guarantees full service history at a main dealer, which promotes the vehicles end of contract value.

Disadvantages to leasing a car

You wont own the car.

Leasing, or contract hire is a non-ownership financial product.  There have been instances in the past whereby lenders have facilitated the purchase of an ex lease car to a 3rd party, however this is not part of the agreement nor something that can be handled when first leasing the car - The best chance is to ask the lender at the end of the contract if they have a way to facilitate the sale, but you should not rely on it being an achievable outcome. 

Terminating the contract early can be costly.

When you lease a vehicle the normal terms require you to pay all rentals and then return, however if you want to return the vehicle early you will likely be liable for 50% of any remaining rentals.  For example you have four monthly payments left and wish to terminate the contract, you would be charged two rentals in order to settle the account.

End of contract charges will apply.

We are confident enough to say that end of contract charges are fair and transparent, as most lenders will follow the BVRLA Fair Wear and Tear guide which is accessible to all.  Any excess mileage on your vehicle will be charged for at a rate of pence per mile.  You will also be charged for any missed services or unapproved alterations.

Should I lease my next car?

If you are happy to sign up to a contract and not own the car at the end (nor have to worry about selling it) then a personal contract hire could be perfect for you.  

Leasing is great if you:

1. Want to change into a brand new car every 1.5-5 years
2. Like to keep a low and consistent monthly payment
3. Prefer not to get involved with buying and selling cars
4. Need a tax efficient solution for your business transport needs

Leasing is might not be right for you if:

1. Have a poor credit history or overdue financial commitments
2. You wish to own the car, or make personalisation or modifications
3. Need to change your car more than every 12 months
4. Need to take the car out of the UK for more than 90 days at a time