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Car leasing is the long-term rental of a vehicle. You won’t own the vehicle and the leasing company will be the registered keeper. You sign a rental agreement allowing you use of a car in return for paying a monthly amount for a set period. Once this ends, you hand back the car and you can either start another lease deal on a new car or walk away.
Lease agreements tend to last between two and four years.
Choose the type of car you want to lease, including make and model
You’ll also need to select the initial payment, which is a lump sum that you pay at the start of the rental agreement
Decide how long you want to lease the vehicle for, also known as the contract length
Estimate your annual mileage
You can then compare the options available from different leasing companies to get the best deal
Apply for your chosen deal, you’ll be subject to a hard credit check, and if you’re accepted, your new car will be delivered to your home, or you can pick it up
You make monthly payments for the duration of the contract length
Once your lease agreement has ended, your car will be picked up or you can drop it back to the leasing provider. You won’t have anything else to pay, unless you’ve damaged the vehicle
You’ll need to have had a full UK driving licence for at least a year and there may be age restrictions, for instance you must be over 18 years old.
Also, because you’re entering into a financial agreement your credit history will be analysed, as well as your income and existing debts. This means that having a good credit score is important as the provider will want to know that you can comfortably afford the payments and aren’t likely to default, leaving them out of pocket.
If you're a younger driver who is yet to build up a healthy credit history, you might find it hard to be accepted for a lease agreement.
It can be a cheaper option than car finance, especially if you prefer to have a new car every few years and have a good credit score. Also, you don’t have to worry about your vehicle dropping in value and having to sell it in the future.
However, you won’t own the vehicle, so if you default on your payments, it can be taken back by the leasing company and there’s no option to purchase the car.
It will depend on a few different factors:
If you want to cut the cost of leasing a car, try to:
Choose a model of car with a lower value
Pay a higher initial deposit, if possible, but don’t leave yourself out of pocket
Opt for a longer lease, but be aware that you’ll need to start paying for an annual MOT if your agreement is longer than three years
Try to limit your annual mileage to keep costs down
Refrain from making any modifications to your lease car – if they’re irreversible changes you’ll be charged
Limit the optional extras (like tinted windows and in-built sat-nav). Adding them to your rental agreement will increase payments
Compare car leasing deals with Auto Lease Compare[1]
Compare car leasing dealsIf you’re considering leasing a car, here are the advantages:
Even though the lease company is the registered keeper of the vehicle, you’re still responsible for getting car insurance for your lease car.
It works in the same way as buying cover for a car that you own, so the best thing to do is compare the options available. You can choose the level of cover you need for your lease vehicle and see how the policies stack up against each other easily.
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