How Does Leasing a Car Work? Your Complete Guide to Leases

In this guide:

• What is car leasing?
• How does leasing a car work?
• Pros and cons of vehicle leasing
• What does a car lease include?
• What’s the difference between contract hire and contract purchase agreements?
• More FAQs about leasing a car
• Find the latest car lease deals

What is car leasing?

Car leasing is where you enter a contractual agreement to rent a vehicle on a long-term basis. Contracts typically range from 2-5 years, after which you return the vehicle. You have the option to make an initial payment at the start of your agreement, and then make monthly payments throughout the contract period – making it nice and easy to manage each month.

There are several types of lease contracts available, with the most common being Personal Contract Hire (PCH) for individual use, and Business Contract Hire (BCH) for companies and sole traders.

Leasing is an affordable way to get your hands on a brand new vehicle, without having to buy outright or enter into a loan, which often have higher interest rates. A lease differs from financing a car through a Personal Contract Purchase (PCP) or a Contract Purchase business agreement, as you usually don’t take ownership of the vehicle at the end of the contract.

How does leasing a car work?

The lease process might seem complicated – especially if it’s your first time leasing a car – but it’s actually relatively straightforward! Though the exact nuances can vary, you can typically expect a process similar to one we’ve outlined in our step-by-step overview below.

Step 1 - Determine your budget and affordability

Before you do anything, take a step back and assess your financial situation. Though leasing tends to be more budget-friendly than buying a vehicle outright, it’s important to make sure you consider all the associated costs.

• Check your credit score, as this can affect whether you’re accepted for a lease and the cost of the deals you’d be eligible for. A hard credit search will be carried out by the provider, which will leave a mark on your credit, so this will need to be carefully considered
• Decide how much you want to pay each month, taking your other commitments into account. Remember, the more you pay into your initial payment, the lower your monthly payments will be. Additionally, your annual mileage will affect the costs of your payments. To estimate your mileage, check your historic mileage use on your service history to determine how much you might use each year.
• Consider other costs associated with using a car, such as insurance, services, and MOTs. Some lease deals can incorporate servicing and optional maintenance packages into your contract, absorbing this into your monthly payments.

Step 2 - Find deals for a vehicle you like and get a quote

Next, you can decide on a vehicle and start exploring different leasing deals that suit your budget, needs, and desired contract length.

If you’re unsure, feel free to get in touch with us and talk through your needs and requirements. We’ll be able to outline your options and can suggest vehicles that may be suitable for you.

Once you’ve chosen your ideal car or van, you can apply for a quote to receive a breakdown of costs in your potential package.

You’ll receive a formal quotation tailor-made to your specific requirements. You’ll then have the chance to alter and amend the quotation until it is right for you.

Explore the latest deals

Step 3 - Negotiate and apply for a lease deal

Once you’re happy with the quotation and are ready to proceed, you’ll complete a finance application form. This will include information that the finance company may need to assess affordability, such as employment history, addresses from the last 3 years, and proof of identity. 

Your application will be submitted to the finance company for review. Once this is confirmed after a short period, you can move on to ordering the vehicle.

Step 4 - Complete the lease documentation and finalise the agreement

After you’ve been approved, the finance documentation will be issued to you for review and signature. Take the time to read through all the terms, charge information, and fine print before signing – no one should ever pressure you into signing before you’ve had a comprehensive review of the documentation. Additionally, there's often a cooling-off period from when you sign the finance agreement, just in case you change your mind.

Once you’ve signed the agreement, delivery of the vehicle can be arranged. Depending on availability, this can be within 6 weeks for a stock vehicle.

Step 5 - Await delivery of your vehicle

Up next is a period of awaiting your shiny new car or van. Once the vehicle arrives with the dealer and it’s been confirmed that all the necessary paperwork is in place, the vehicle will be delivered to you at a convenient location.

Step 6 - Drive and enjoy your new car

Next, you can get behind the wheel of your new vehicle and enjoy! Managing the lease during your usage period shouldn’t take up any of your time. Simply keep an eye on your annual mileage and stay on top of your monthly payments.

If you lease with Jurni and have any questions during your contract, please call our friendly Customer Experience Team, who will be able to assist you.

Step 7 - Return the vehicle at the end of the contract

Towards the end of your contract, you can decide what you want to do when your agreement ends. You’ll have to return the vehicle, but you can enter another lease for another brand-new vehicle.

Your broker will contact you in advance of the contract termination to see what your plans are regarding a new vehicle. They should also advise you of the funder’s collection process, as well as any potential charges for Fair Wear & Tear or excessive mileage.

Pros and cons of vehicle leasing

Leasing offers you bundles of benefits, including access to the latest vehicles with modern tech and the newest automotive innovations. However, depending on your personal preferences and circumstances, there are some potential drawbacks to consider before deciding if a lease is right for you.

What does a car lease include?

One of the main benefits of lease agreements is that they are designed to work for you, and some include optional add-ons alongside the typical inclusions. These additions include products like maintenance packages and breakdown cover, but these are typically not included as standard.

We’ve outlined the things you can usually expect, or not expect, in a lease agreement. Note, we say “usually” here, as lease agreements can vary to suit your needs!

Car leases usually include:

• Road tax - as the lender will be the registered keeper, road tax is included in the agreement, typically for the full length.
• Warranty - brand new vehicles will come with a manufacturer's warranty, typically for the initial 3 years after a vehicle is registered.

Your lease will usually not include:

• Insurance - you’ll need to set up your own insurance for your lease vehicle to cover the entire agreement period. Some agreements actually require you to provide proof of insurance!
• Replacement tyres - maintaining roadworthy tyres with the legal tread is essential to help stay safe while driving, but checking and replacing tyres when necessary will be your responsibility.
• Services, MOT, maintenance, and repairs - though you aren’t the vehicle owner, your agreement will state that you’re responsible for maintaining the vehicle throughout. You can either manage this yourself or add a package to your contract to cover some of this. A maintenance package can help provide reassurances that work is being done to a high standard and reduces the risk of charges due to excessive wear and tear at the end of your contract.

What’s the difference between contract hire and contract purchase agreements?

Hire agreements like Personal Contract Hire (PCH) and purchase agreements such as Personal Contract Purchase (PCP) or Hire Purchase (HP) share a lot of similarities, and it’s common to see these confused. All these finance options require you to make fixed monthly payments, and usually have an initial upfront cost to pay - sort of like a non-refundable deposit.

The main difference between a hire and a purchase agreement is you take full ownership of the vehicle at the end of a PCP or HP contract, whereas you give the car back when a PCH comes to an end. One way to think about it is that purchase agreements are like a house mortgage, where the property is yours once you’ve paid it off, while hire agreements are like a rental contract, where you never own the property and give the keys back to the landlord when you move out. 

FAQs about leasing a car

Can I lease a brand-new car?

Yes, absolutely! Buying a brand new vehicle isn’t a possibility for many people, but leasing gives you the opportunity to drive the latest cars without the hefty price tag or commitment of ownership.

Can I get a lease for an electric car or hybrid?

Yes, you can lease an electric or hybrid car. Whether you’re already committed to low-emission driving or want to try an EV for the first time, leasing is a great way to try out the latest electric vehicles and experience the newest tech.

Is it better to buy or lease a car?

There’s no definitive answer to whether it’s better to lease a car or purchase one outright, as it’ll depend on your personal circumstances. For example, if you want to drive a new car but can’t afford to purchase one, then a lease allows you to manage the costs and defer the negative impacts to the lender. On the other hand, if you can comfortably afford to buy outright, then leasing might not make sense if you want to become the owner. 

You should also consider how you’ll be using the car. If your mileage is especially high (over 15,000 miles a year), then leasing means you’ll be limited to an annual mileage or will have to commit to more expensive monthly payments to accommodate a higher limit. But if your mileage is more conservative (between 6,000 and just under 15,000), then an annual limit won’t be much of a concern. Outright purchase allows you to drive as much as you want, but if anything goes wrong with the vehicle, then it’s your responsibility to pay for costly repairs up front. On the other hand, leasing agreements often have optional maintenance packages which will cover these costs in manageable payments over the length of your contract, so there’s no surprises.

How long can a contract be?

Lease contracts tend to last between 2-5 years, so you’ll be able to choose how long you want to lease for before entering your agreement.

Can I end my lease early, or extend it?

You should be able to end a lease early, but bear in mind this will typically incur a charge, which can be very expensive. It might be possible to extend your lease, but this varies between lenders, so it’s worth checking.

How does vehicle leasing work for businesses?

Business leases work in the same way as they do for personal leases, in the sense that you rent a vehicle (or multiple vehicles) for a set period of time and return it at the end. Leasing vehicles for your company is ideal if you need vans or cars for business use, but would rather avoid the costs and hassle of managing an owned fleet.

Find the latest car lease deals

When you lease through Jurni, you can be confident you’re getting the best deal on terms that work for you. Simply choose your vehicle, contract length, and agree on monthly costs, and we’ll deliver your new vehicle anywhere in mainland UK.

Enjoy the freedom of driving a brand new car or van without the long-term commitment of ownership with Jurni.

Explore our lease deals today!