Leasing a car for yourself
Many people like the idea of driving a newer car for a fixed amount each month. Personal leasing is one way to do that. This page explains how a personal lease works and how to get the most from one.
How a personal lease works
A personal lease is usually called personal contract hire. You pay a fixed monthly amount to use a car for an agreed time. At the end you hand it back. You never own it, and there is no option to buy it.
That is the main difference from hire purchase and personal contract purchase. With those, you can become the owner by making all the payments, or a final payment at the end. With a lease, the finance company owns the car throughout.
Leases usually run for 12 to 48 months. A shorter lease lets you change car more often. A longer one generally brings lower monthly payments.
Reading a lease deal
Lease prices are often shown with figures like 3+35. The second number is the number of monthly payments. The first is how many monthly payments you pay up front. So 3+35 means three payments at the start, then 35 more.
Personal contract hire payments include VAT and road tax for the length of the contract. Some prices on comparison sites are for business customers and leave VAT out, so check which you are looking at. Insurance is always yours to arrange, and you need it in place on the day the car arrives.
You can often add a maintenance package for a fixed monthly amount. It covers servicing, tyres and other parts that wear out. Without one, anything not covered by the maker's warranty is yours to pay for.
Choosing your mileage
The monthly price is based partly on how far you expect to drive. Common allowances are 8,000, 10,000, 12,000 and 15,000 miles a year. It is worth working out your real yearly mileage before you choose.
If you go over the allowance, you pay an excess mileage charge at the end. The rate per mile is shown in your contract. If you can see you will go over, you can put a little aside each month.
Enjoying the car
You are responsible for keeping up the servicing shown in the handbook. On a four-year lease, the MOT in the final year is yours to arrange too.
Because the car belongs to the finance company, ask them before you change anything, such as fitting a tow bar. To drive it abroad, you need a VE103 vehicle on hire certificate.
Handing it back
At the end, the car is collected and inspected. Normal wear from everyday use is accepted. Damage from a specific event, such as a knock or a scrape, may be charged for.
The BVRLA, the trade body for rental and leasing, publishes a fair wear and tear guide. Ask your leasing company for a copy before collection. The BVRLA suggests checking the car yourself 10 to 12 weeks before it is due back. That leaves time to have any damage professionally repaired. Be there when the car is collected, so you can agree its condition together.
If things change
Ending a personal lease early may not be possible. Where it is, the cost can be much higher than with hire purchase, so read that part of the contract. If the car is written off or stolen, the insurer's payout may not cover what you owe the leasing company.
If paying becomes hard, talk to the leasing company before you miss a payment. If you have a complaint, raise it with the company first. It usually has up to eight weeks to reply. After that, the Financial Ombudsman Service looks at complaints about lease agreements, including end-of-lease charges, for free. BVRLA members also offer the BVRLA's own dispute service.