Leasing is now one of the most popular ways to finance a car. There are several different types of leasing contracts, such as personal contract hire and personal contract purchase. Your payments can cover the cost of the car, and also the cost of maintenance in some packages.

The Different Types Of Leasing Contracts

Leasing a car is essentially the same as renting it long-term. You will pay a set fee every month for the car over a number of years, and agree to a mileage. If you opt for a personal contract hire (PCH) agreement, you don’t own the car and you will need to give it back at the end of the term. If you have a personal contract purchase (PCP) agreement, you can buy the car at the end of the term in exchange for a payment, usually based on the value of the car agreed when you took out your contract. With PCP, you will need to make a deposit and PCH agreements usually ask for three months’ rent in advance.

Lower Payments

Leasing a car is generally cheaper than buying. If you buy a car, the chances are that you’ll need to take out a personal loan from the bank, which can lead to costly monthly repayments. If you opt for a leasing agreement, your payments are usually lower, particularly if you choose PCP. You can also get leasing packages that include the cost of maintenance, so you will never need to worry about paying for servicing, or a new tyre. PCH payments are usually lower than PCP, but you have to pay three months’ rental in advance in most cases, so you will need to make room in your budget for this when you are first shopping for your car.

leasing a car
Leasing a car can be one of the most affordable ways of driving away in a new car

New Cars Every Few Years

If you like to drive the newest cars with the latest technology, leasing a car is the best way to go about it. It’s almost like your mobile phone contract – you can get a new car every three years, almost as regularly as you can change your phone. There’s barely any commitment necessary, you can simply hand your car back at the end of the term and get a new one.

Low Repair And Maintenance Costs

As mentioned, you can opt to include a maintenance package with your monthly payments. The maintenance package includes servicing and tyre replacement, both of which are required to return your car at the end of the contract in good condition. You can also opt to include breakdown cover, as well as cover for general repairs such as windscreens, batteries and exhausts. If you’re worried about repair costs, then leasing a car with a maintenance package is for you.


The best thing about leasing a car is that the contracts are usually negotiable. It’s always better for a dealer to sell a car based on finance, as there are more opportunities for sales in the future when you return your car and you’re ready for a new one. For that reason, contracts are negotiable. If the dealer won’t budge on the price, get them to throw something in for free – paintwork, alloys or Bluetooth.

Affects Your Credit Score

As leasing a car is essentially like taking out a loan, it can affect your credit score. In the first instance, you will need to get approved for finance and the finance company will take a look at your existing credit score to see if you are a risk, or not. If you miss a payment, or several payments, this will affect your credit score and you will struggle to get a mortgage or credit for anything else. For that reason, you should always make sure that you can afford your car’s monthly repayments.


You’ll have to be aware of all the different terminology that dealers use when organising a leasing deal. Here are some of the terms that you should know:

  • Balloon payment – The payment that you make to the finance company if you wish to keep the vehicle at the end of your contract.
  • Advanced rental – An initial payment that you have to make before you can drive the car.
  • Depreciation – How much value a vehicle will lose over a period of time.
  • Excess mileage charge – How much you’ll be charged per mile if you go over the limit.

Leaving Your Contract

If you wish to return the car before the end of your contract, you will usually have to make a payment. You may even be asked to pay the entire outstanding rental fee. If you can’t keep up with the payments, you have the right to return the car if you have made half of the payments, under the consumer credit act.

Mileage Cap

When you first take out your leasing contract, you’ll be asked to estimate a total mileage for the period of time that you drive the car. You can set this yourself, but don’t underestimate how many miles you think you will do, as you’ll be charged per mile if you go over. It’s better to have too many miles than not enough.


The last thing to consider when leasing a car is that you’ll never actually own the car unless you make the balloon payment. From an investment perspective, this isn’t great as you have nothing to show for the payments, but at the same time, leasing is one of the most affordable ways to get out on the road.

If you’re thinking about leasing a car, consider all the advantages and disadvantages. You can get a new car on a regular basis, but you’ll never actually own it. You may need to budget extra for the advanced rental payment, but the majority of contracts are negotiable so you can get the best price. If you drive long-distance, take care not to underestimate the mileage as this could leave you out of pocket.

Leila Jones

Disclosure: This article is paid for content.