Initial payment or initial rental is the upfront payment you make when leasing a vehicle. Learn how initial payments affect your monthly leasing costs and how much you could choose to pay upfront.
You can lease a car from as little as £200 per month, but how much a car lease costs overall depends on a range of factors including the car you choose, how long you’d like to drive it for and how many miles you’ll do in that time.
Some other costs, like road tax, are included in your lease payments, but you’ll need to factor in insurance costs and any maintenance you’d like to add on before calculating your budget.
Car leasing, also known as personal contract hire (PCH), is like renting. It's a way of driving a brand new car without owning it. A lease is a financial agreement made with a funder, although leasing is often done through a lease provider who will sort everything for you.
You simply choose the car you want, decide how much you want to pay upfront, how long you'd like to drive it for (usually between 2 and 5 years) and how many miles you expect to drive in that time.
This information is used by a funder to calculate your monthly payments and you can decide if the lease is right for you. If it is, your car will be delivered directly to your door and you get to drive it for the duration of your lease. At the end of your contract - provided there is no damage outside of wear and tear and you have stayed within your agreed mileage - you simply hand the car back to the provider.
At the end of your lease you simply hand the car back to the provider.
They will get in touch a few months before your contract ends to discuss your options and arrange collection of the car.
Be sure to perform a thorough check of the vehicle before it’s due to be returned so you have enough time to make any repairs outside of fair wear and tear.
It’s important to be aware that you may need to pay excess charges if you have driven the car over the agreed mileage limit, or if the car is damaged beyond the expected fair wear and tear.
By the end of your lease, you will have been driving the car for 2 to 5 years; ‘fair wear and tear’ is your funder demonstrating its understanding that your car won’t be in the same condition as it was when it was delivered. For example, a single small scratch on the paintwork could be considered ‘fair’, while a huge impact scrape would not.
‘Fair wear and tear’ means you don’t have to constantly worry about the condition of your vehicle and lets you enjoy driving it instead. Find out more in our guide to leasing fair wear and tear
Leasing is a popular way to get a new car, but you need to make sure it’s right for you. Here are some advantages and disadvantages to keep in mind when making your decision.
Pros:
The initial payment is usually low.
You’ll typically have lower monthly payments.
The lease payments include road tax and the manufacturer’s warranty will often last for the majority of your lease.
You don’t have to worry about the car’s depreciation.
Cons:
You’ll never own the car.
You’ll face penalties for excess mileage or damage outside of 'fair wear and tear.'
Most contracts include fees for terminating your lease early.
You may have to pay more for specific colours or trim levels.
There are sometimes extra fees and costs involved in leasing a car. Your agreement may include:
An initial payment usually equivalent to 3, 6 or 9-months’ payments.
Late payment fees.
Excess mileage fees (sometimes per mile) if you go over what was agreed at the start of your lease.
Repair fees on anything over ‘fair wear and tear’, to be paid at the end of the lease.
Also remember that prices listed don’t always include VAT, which you’ll have to pay unless you are a VAT-registered business.
As a car lease is a financial agreement, you will need to have a good credit score in order to get approved for a lease.
Remember, how your credit score is measured can vary depending on the credit report you use. Similarly, funders will have different criteria, so whether you are approved for a lease may depend on the funder the deal is with.
Very few car lease contracts include insurance, so you’ll need to arrange this yourself. When leasing, you will need to take out fully comprehensive insurance on your vehicle for the duration of the contract.
When you take out an insurance policy, you’ll need to let the insurance provider know that it’s for a lease car and share the terms of the lease, alongside the name of the car’s ‘registered owner’ (normally the lease company) and the names of any additional drivers.
You may also want to consider ‘gap insurance’. Gap insurance protects against any difference there might be between the insurance company pay-out if your car is written off and the amount left to pay on your lease.
If you’re looking at getting a brand new car, you can sell your old car using a private ad on Auto Trader. You can create and upload your advert in just three steps, and get your car in front of more buyers than on any other site.
Auto Trader owns Vanarama, a vehicle leasing broker. As a regulated broker, Vanarama works with a selected group of funding partners to find you the best lease deal. Vanarama makes a commission on the deals and the commission will depend on the deal you choose and the funder the deal is with. Whilst you will not be charged any fees directly by Vanarama, the commission will be reflected in your monthly lease payments.
Whether you buy or lease your next car is purely down to you. Consider your budget, mileage and personal preference on owning a car.
Leasing is a good choice if you want to drive a brand-new car every few years without owning one. It can work out cheaper per month than buying on finance or with cash. It also means you don’t have to worry about depreciation - the rate at which your car’s value drops over time - as you can simply hand it back at the end of your contract.
If you’d prefer to own the car outright, buying may be the better choice for you. There are also no limits if you want to make any modifications to the car. Remember, you can also buy a car on finance and pay monthly rather than buying with cash.
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Monthly rentals ('payments') are not an offer of credit. Payments are based on offers available today which may be withdrawn or varied at any time in the future without notice.
Contract Hire ('Leasing') is subject to status and approval and is only available to UK residents aged 18 and over. Vehicle must be returned with no more than fair wear and tear to avoid further charges. You will not own the vehicle. Excess mileage charges and return conditions apply.
Auto Trader Limited (Firm Reference Number: 735711) is a credit broker and not a lender. Auto Trader Limited introduces you to Autorama UK Ltd (Trading as Auto Trader leasing), which acts as a credit broker in its own right. Autorama UK Ltd, Maylands Avenue, Hemel Hempstead, HP2 7DE (Firm Reference Number: 630748) may go on to introduce you to one of a limited number of funders. Autorama UK Ltd will typically receive a commission or other benefits from the funder as a result of this introduction.
Autorama UK Ltd is an Auto Trader Group Plc company.
Vehicles are subject to availability and may vary from images shown.
*You can only return your lease vehicle for free if you have driven it for less than 50 miles (above what was already stated on the mileage clock when the vehicle was delivered). The vehicle must also not have any damage.
**We can only deliver to Mainland UK, excluding Northern Ireland.