What Is Car Leasing

To lease a vehicle means that you agree to pay a sum of money to rent the said vehicle for an agreed amount of time be it a car or a light commercial vehicle (LCV) including vans and pickup trucks. The finance company owns the vehicle and the applicant is the registered keeper. Car leasing's formal name is contract hire and can come in two forms - personal contract hire (PCH) and business contract hire (BCH). Contract hire can often be confused with hire purchase (HP), car hire and personal contract purchase (PCP) but there are some key differences. 

An easy way to look at car leasing is to look at the different types of home ownership and renting types. Personal contract purchase is like a rent to buy scheme, hire purchase is like taking out a mortgage and finally car leasing is like renting a house. The biggest difference between the three options is the financial structure itself and ownership of the vehicle. Here we’ll explain these two significant differences.

Finance structure

Car leasing’s financial structure is perhaps the most confusing at first glance when compared to PCP or HP. At the start of the agreement will be an initial payment which will typically be 3, 6, 9 or 12 times the monthly payment, with All Car Leasing you can also choose a specific amount that you would like to use as an initial payment. A higher initial payment will result in lower monthly payments. This is not a deposit the initial payment is not returned to the leaser once the car has been returned. 

An example would be if you chose a 3 year deal for £100 a month with a 6 initial payment then your initial payment will be £600 and then the next 35 months payments will be £100. 

Read more about the initial payment here.

Ownership

Perhaps the easiest feature of car leasing to understand is the ownership aspect. With car leasing, you do not own the car. The car is purchased on your behalf by the chosen finance company and you are simply renting the vehicle for the agreed period. You will be recognised as the registered keeper when applying for vehicle insurance. However, this doesn’t mean you are free to treat the car badly or not treat it as if it’s your own car. Finance companies keep a fair, wear and tear policy which by accepting the delivery you agree to at the beginning of the lease. 

Not owning the vehicle may at this point raise some alarm bells - there are pros and cons to it which we’ll discuss here. 

Owning a vehicle means you are 100% responsible for it if something goes wrong. When the finance company owns it, it is theirs - this means that if the car fails or there is something mechanically wrong with it that wasn’t caused by yourself directly then it’s up to them to resolve it. Secondly, all vehicles leased by All Car Leasing are new and come with manufacturer's standard warranty giving you peace of mind if something needs fixing. Please refer to the manufacturer’s warranty document for exact details of what your warranty will potentially cover.  

Features of car leasing

Here is a list of some key features of what a car leasing agreement involves- 

No deposit

With a lease agreement, there is no ‘deposit’ to pay most of the time. The deposit is replaced by an initial payment which is paid usually after the vehicle has been delivered

Read more about the initial payment here.

Long-term hire

Car leasing agreements usually last for 2, 3 or 4 years which typically means the vehicle will almost always be within warranty. 

Read more about contract lengths here.

You set the mileage

A lease agreement is on the basis of how long you want it for, how much initial payment you want to pay and how many miles you drive in a year. The finance company calculate the cost of the car based on these. As with any vehicle the more miles you drive a year the faster the car will depreciate this is the same with a lease higher annual mileage will increase your overall lease cost.

Read more about the mileage here.

No interest

Unlike some PCP and HP deals, car leasing deals do not have any interest added to the deal. This may be of particular interest to followers of Islam and other faiths who are forbidden from paying interest. 

Fixed monthly payments

The monthly payments that are set at the beginning of the agreement will never change for the duration of the agreement helping applicants budget wisely for the next 2, 3 or 4 years.

What is All Car Leasing’s role?

Here at All Car Leasing, we are a credit broker and not a lender. This means that we bring the customer (you or the business), the vehicle and the finance company together. We use all of our experience to find the best deals available paired with the best finance company for the ultimate deal. Many of these deals can be seen on our special offers page.

For more information about us as a company click here.

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