Guide to Leasing

How car leasing works

When looking to get a new vehicle there are many different options to take, from purchasing a vehicle outright to leasing them. But what people want to know is ‘how car leasing works’.

Car leasing overview

Leasing is a signed agreement that allows a person to pay an agreed monthly fee for the vehicle they want. Simply decide what vehicle you want to lease, whether that be a car or a van. Decide which leasing option would suit your needs. Do you want to keep the vehicle or return it back to the finance company?

Finally, decide how long you want the contract to run for. The industry-standard these days is between 2 – 5 years but companies are also known to do 1 year, 6 months and even 3-month car leases dependent on the kind of contract you want.

A contract will then be drawn up between you and the finance company. You will then be asked (if it is necessary to the contract) your annual mileage.  You will also be asked if you would like your agreement with or without maintenance.

If required this is the point you would need to place your deposit.  This is usually equal to the first 3 months of your contract. From here your agreement will start and the monthly payments begin.

Is car leasing better than purchasing?

Whilst many people have different answers to this question the honest answer is its all self-preference.

If you are wanting to change your car every few years and have no interest in trade-in or sell on values then car leasing may be perfect for you.

Car leasing is also good if you can’t afford to pay for the vehicle outright, but can afford the monthly payments.

If you have high annual mileage or like to keep your vehicles for a longer period of time, it would be a good idea to consider purchasing. Still, some people with high mileage do prefer to lease for financial security.  When it comes to returning the vehicle there will be extra charges for high mileage.

What is the cost of car leasing?

Whilst an exact cost cannot be given as each car lease option is different. It all comes down to what you can afford. If you can afford to buy your dream car outright, then great.  But if you would rather pay smaller monthly payments with the option to either keep the car or even take it back and get a new model.  Then leasing would be a great fit for you.

All prices are negotiable with each finance company so work out what is best for you and your situation.

Personal Contract Hire (PCH)

This is a long-term rental agreement, best suited to someone who doesn’t want to own the car at the end of the contract. You will pay monthly installments for an agreed set amount of time. At the end of the contract, you will return the car back to the finance company.

Personal Contract Hire (PCH) is ideal for those that want a new car every few years. There’s no worry about having to re-sell the car at the end of the agreement as it gets returned. A lot of car leasing companies offer maintenance which helps avoid unexpected repair bills.

Benefits of PCH include:

  • Drive away in a new car with small upfront payments
  • It is possible to reduce Benefit In Kind (BIK) tax
  • You have the option of having all car maintenance and services included in the monthly price
  • You can pick the exact colour and trim
  • Exposed to less financial risk
  • You don’t need to worry about selling your old car when looking for a new one
  • PCH is cheaper than ownership over the long term if you intend to replace them every few years

Business Contract Hire (BCH)
Business Contract Hire also known as BCH is a long term business rental agreement.  It gives you the ability to have a car or van for a set amount of time at a fixed monthly rate.  You pay the rate in monthly installments across the term that was agreed with your finance company.

Then return the vehicle at the end of your contract. Setting up a Business Contract Hire is just as simple as setting up a Personal Contract Hire (PCH) agreement.

Business Contract Hire gives you the opportunity to drive a new car over an agreed term and mileage allowance. Many businesses tend to lease cars rather than purchase outright.  This is to avoid large drops in car value at the end of the contract. You have the choice of either starting a new contract or leasing the same car at the end.

There are many benefits for business car lease such as Fixed Costs, Easy Car Maintenance, Better Cash Flow and VAT Benefits. With VAT you can claim up to 100% of it back by choosing the car maintenance package, which is agreed before the contract begins.

Offering flexible contract lengths between 18 and 48 months, Business Contract Car Hire is eligible for, Limited Companies, Partnerships and Sole Traders that can provide bank statements, address and their company director MUST provide proof of ID. Also to be eligible for BCH your company must have a good credit rating.

Take a look at the latest car leasing deals.


If you would like further information, let our car leasing consultants know by contacting us on or

0808 196 1771.