How does car leasing work?

Searching for a new car can feel like a time-consuming process, but it doesn’t need to be that way.

Car leasing is a popular alternative to car ownership, providing drivers with a cost-effective way to drive the latest vehicle without needing to buy one outright. If you’re new to car leasing, we’ll break down the basics to help you learn more about how leasing works, along with useful information you need to know about taking out a lease agreement. In this guide:

What is car leasing?
Types of car lease
How the car leasing process works
What happens at the end of a lease?
Ready to lease

What is car leasing?

Car leasing is one of the most affordable ways to drive a new car. It is like a long-term car rental, where you pay fixed monthly payments for the duration of your lease agreement, before returning the car for a newer model.

When you take out a car leasing contract, you make an upfront payment that acts as a deposit. You then pay a fixed monthly payment for the length of your contract, before returning the car to the leasing provider.

The cost of the monthly payment is based on the make and model of the car, the annual mileage, and the length of the contract. For new cars, most car lease deals are for 2 or 3 years.

Types of car lease

There are several different types of car finance on the market, but at LeaseCar, we specialise in contract hire leasing, specifically Personal Contract Hire (PCH) and Business Contract Hire (BCH).

PCH leasing agreements are for individual drivers for personal use, whereas a BCH agreement is for business use.

With both types of contract hire, the lease acts as a rental and there isn’t an option or obligation to purchase the vehicle at the end of the lease term. There also aren’t any balloon payments or additional costs at the end of the term. 

A PCH or BCH contract means you will never own the vehicle outright, however, the monthly rental costs of this kind of contract are considerably lower than other types of leasing.

Interested in car leasing? Speak to our team

How the car leasing process works

Here are 12 simple steps to car leasing, from start to finish.

1. Do your research
Before you start the application process, it's essential to understand what car leasing is and the terms of lease agreements, as well as any potential reasons why it might not work for you.

2. Set a budget
Next, you'll need to work out how much you can afford to spend. This includes the initial payment, monthly payments, and any potential costs, like excess mileage charges.

3. Choose a vehicle
Start by browsing our range of lease deals and shortlist vehicles that suit your criteria. Think about what you want from a vehicle – size, make, manual vs. automatic, fuel type, or whether you want to drive an electric vehicle etc.

4. Your lease package

Once you’ve chosen your vehicle, click on the make and model page, where you’ll be able to calculate a car leasing package that’s best suited to your needs. We’ll need to know:

Lease type
Lease length
Expected mileage
Initial rental cost
If you want to add a maintenance plan

You can look at packages for as many vehicles as you like until you find the perfect deal.

5. Confirming your lease Once you’re happy with the price, the lease details and the vehicle you’ve chosen, you can complete the online application to confirm your lease. You can also get in contact with our experienced team on the phone, email or live chat. Our vehicle experts can support you in finding the right car or van leasing deal for your needs and answer any questions you have. 6. Identity checks After we’ve confirmed your lease deal, we will take some personal details from you such as name, date of birth, residential status, address history etc. to find out about your circumstances. We also need you to provide 3 forms of ID to safeguard from fraud:

Driver’s license – to confirm your identity, and to prove that it’s legal for you to drive a vehicle in the UK.
Proof of address – In most cases, you will be asked to provide two forms of proof of address (this can be a utility bill with your name on it or a bank statement).
Proof of income (this can be a payslip, accountant’s record, or even a bank statement – it simply needs to show that there is regular income into your account).

7. Credit checks Once you've set your lease terms, we'll need to run a credit check to ensure that your credit score and history meet our requirements. This is a quick, simple process that'll give you a response as to whether you've been accepted in no time. To proceed with the credit application, we need your employment details. This tells us you’re in regular employment and have a regular income, so you’ll be able to easily pay your rental contributions every month. We’ll need to know your employer’s name, address, and details of your employment history over the past 3 years. 8. Providing bank details For payment, security, and identification purposes, we’ll also need the details of the bank account that you’ll be paying your car finance rental from. We’ll need to know your account number, sort code, branch address, name on the account (this must be your name) and a 3-year address history. 9. Agree and sign agreement We will generate an order form for you to review online. Once you are happy with the order and estimated delivery date, sign and submit this back to us. We then have authorisation to secure and order your vehicle. While your vehicle is being prepared by the manufacturer, we will send you the official documents for your finance agreement. These documents will have to be signed and returned before delivery of your new vehicle can take place. 10. Ordering your vehicle Once your credit check has been approved based on your chosen vehicle we can start ordering your car. We will speak to our dealer network and confirm an estimated delivery date for your vehicle and the specification you have ordered. 11. Make initial payment After all these checks are complete and we have the relevant information, you’ll be able to make the initial payment that you agreed as part of your lease contract. 12. Delivering your vehicle All our vehicles have free UK delivery to your home. Upon delivery you will be required to sign an acceptance note and then the keys for your new vehicle will be handed over to you. After you receive your car, you’ll then pay your agreed monthly payments for the duration of your lease agreement.

What happens at the end of a lease?

^{One of the main advantages of car leasing is that at the end of your lease agreement you can hand back the keys and choose another vehicle.}

^{There are some stipulations on the condition and mileage of your vehicle when you return it, which you’ll have agreed to at the start of the term. If you’ve gone over your mileage or the vehicle is not in the condition set out in your lease agreement, you may have to pay a fine.}

^{As long as you’ve stuck to the agreed mileage and you’ve kept the car in good condition, you won’t need to pay anything at the end of the contract. You don’t need to sell your vehicle on or worry about depreciation, you simply return the car and can start looking for your next vehicle.}

Ready to lease

With over 25 years in the industry, we've become the UK's go-to car leasing company. We’ll get you the right deal

Not just a number – we’re here to serve you. Our team will take the time to understand what you need from a lease and make sure you get the right deal.
Expertise – on average, our team of leasing experts have each been with us for 7 years.

View our lease deals

If you’re ready to lease your next vehicle, get in touch with our friendly team today to discuss your options. Call us on 03447451818 or contact us online.

Trust, Compliance & Small Print

VAT Reg No. 715 25 1558 Company Reg. No. 3635778
Financial Services Register No. 677877 ICO Registration No. Z7112215

LeaseCar UK is a trading style of Central Contracts (S.O.T.) Limited
Central Contracts (S.O.T.) Limited is a credit broker not a lender
Central Contracts (S.O.T.) Limited is authorised and regulated by the Financial Conduct Authority
We are acting as a credit broker for the purposes of arranging your selected finance contract. We have a commercial relationship with a carefully selected panel of lenders and we may receive a commission from the selected lender. We do not charge you a fee for our credit broking services.

All primary prices shown on this page ex VAT at the prevailing rate unless otherwise stated.
An excess mileage charge may be applied if the contracted mileage is exceeded. Full details will be provided within the written quotation.
You will not own the vehicle and it should be returned clean in a condition that is commensurate with its age and mileage, otherwise charges may apply.

From April 2020 WLTP will replace the current NEDC test procedure for establishing the official Fuel Consumption and CO2 emissions of new cars.
Please be aware of the following:
For vehicles registered on or after 1st April 2020 vehicle road tax costs will be based on the WLTP CO2 values and may change the monthly rental cost.
Vehicles registered on or after 6 April 2020 Please be aware the addition of certain factory fitted options may impact the vehicles co2 emissions and affect your monthly rental.

The Financial Ombudsman (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk.

Central Contracts (S.O.T.) Limited is an appointed representative of ITC Compliance Limited which is authorised and regulated by the Financial Conduct Authority (their registration number is 313486) and which is permitted to advise on and arrange general insurance contracts as an intermediary.