Car Leasing Explained – FAQs

Whether you want to know the benefits of leasing a car or the best car leasing options to suit your business, here are some of the most commonly asked questions.

What is car leasing?

Car leasing refers to the process by which you can pay for the use of a vehicle over a period of time that’s specified in a pre-agreed contract. You are essentially hiring the vehicle, and pay for its use with an initial down payment and subsequent monthly payments. A vehicle lease will last between 24 and 48 months.

How does car leasing work?

At the start of a vehicle lease contract, you’ll need to pay an initial cost which usually amounts to about two to three months of your monthly payments. This will then be followed up with monthly payments, agreed as a part of your contract.

You’ll have the option to choose which manufacturer and model you want. You will need to outline to your provider how long you require the car for, how many miles you’re likely to drive annually, and any other additional services you require such as maintenance.

At the end of the lease you will hand the car back over to the leasing company, unless your contract states that you may have the option of buying it as part of your car leasing options.

What are the benefits of leasing a car?

When you buy a car outright, it will inevitably lose value over time. However, by leasing a vehicle or fleet of vehicles you will not own the vehicles, which means that you won’t have to go through the process of selling the vehicle which takes up precious time. There is also the risk around what the vehicle will be worth. Car values can fluctuate and you might find that it sells for a lot less that you expected. With a lease, you don’t have to worry about selling it on. Instead, you would simply pass the keys back over to your vehicle lease provider.

With a vehicle lease agreement, you will be able to drive a brand new model at the end of each agreement, upgrading from your last model at the end of the contract. Regular replacement also means that you don’t have to worry about the vehicle being out of warranty. Depending on the terms of the agreement, you can also factor in maintenance services too.

Leasing vs buying a car – which is cheaper?

If you’re considering vehicles for business purposes, leasing will give you the option of the use of vehicles you require without having to release large amounts of capital up front. From a business perspective, this brings valuable cash flow benefits and, because costs are fixed, also helps with budgeting. There are also potential VAT savings.

And because leasing vehicles can come along with additional services such as maintenance, you don’t have to worry about dedicating time and resources to servicing your business vehicles.

What happens if I exceed my agreed car lease mileage allowance?

If you exceed the car lease mileage laid out in your initial agreement, you will have to pay an excess mileage charge. This is a fixed price per mile which will be provided to you when you get your initial leasing quote. The rate will vary depending on the car you’ve decided to lease. Try to give an accurate estimate of the amount of miles you’re likely to cover annually – the more accurate you are the less likely you are to incur extra costs at the end of the lease agreement.

Can I get a car lease with insurance?

Insurance is not provided as part of your lease payments. You will need to organise insurance separately.

What car leasing options do I have?

When it comes to organising a lease vehicle, it’s important to establish which type of lease is the best option for you.

There are different forms of leasing or similar vehicle financing methods available, mainly contract hire, contract purchase agreement, or a finance lease.

Contract hire is the most popular form of vehicle finance agreement. Learn more about business contract hire with guidance from our team of experts.
Need further advice when choosing the right car leasing options for your requirements? Contact Maxxia for expert advice on your finance options.