What is car leasing?

Car leasing, also known as Personal Contract Hire (PCH), is a flexible option for many people. Depending on your position, purchasing a brand new or second-hand car can be a significant investment. Whether it’s for commercial or non-commercial purposes, car leasing offers an alternative that is typically cheaper and doesn’t require a long-term commitment.

In this blog, we’ll be explaining car leasing, how it works, what’s involved, and why it might be the best option for you.


How does car leasing work?

Essentially, car leasing is an extended form of car rental. You won’t own the vehicle, but you are permitted use of it for as long as you pay the fee. Payments are made on a monthly basis, with amounts varying depending on the make and model of car that’s being leased.

Leasing a car typically takes place over two, three, or four years. After which, you won’t be able to purchase the car. Instead, the car is returned to the provider. Most car leasing deals are advertised as two sets of numbers, separated by a ‘+’ symbol. This indicates the initial payment in terms of months, followed by the number of subsequent monthly payments. For example, a car lease that lasts for 36 months with a deposit that’s equivalent to 4 months of payments would be described as 4+36. Oftentimes, a higher initial payment will be followed by lower monthly payments.

Business leasing

Leasing a car for business purposes, known as business Contract Hire (BCH), shares many similarities to personal leasing. The main difference arises from the fact that the car is being leased on behalf of a company rather than an individual. Here, a single lease allows up to five people employed by the business to use the car.

Business lease deals tend to be cheaper than personal ones. This is because 100% of the monthly payment VAT can be claimed back, so long as the car is used exclusively for business purposes. If the car is partly used for personal reasons, the company can still claim back 50% of the VAT. Business leases also often have a higher mileage limit to account for multiple users and long-distance journeys.


The process of car leasing

Leasing a car is a relatively straightforward process, although it does come with certain terms and conditions. The first is a fixed mileage limit. This sets out the total distance you are permitted to travel in the car every year. You’ll be charged extra for going over the mileage limit, so it’s important to determine how much you expect to use the car before entering into a leasing agreement.

It should be noted that any miles that aren’t used during a year of the contract will be carried over to the following years. As a result, you’re likely to make full use of all the miles you pay for when leasing a car. Nevertheless, the first step is to check what the yearly mileage of the contract is and decide whether it fits your needs.

Maintenance is another consideration. Most car leasing contracts do not include payments to cover any potential services the car requires. It’s therefore your responsibility to maintain the car while it is in your use. A car returned in a damaged condition at the end of the contract will result in the finance company requesting additional payment to cover the cost of any repairs.

Required documents

To apply for a car lease, you will need to present a valid driving license and proof of address. The latter can take the form of any official document, so long as it shows your current living address. Common examples are utility bills or council tax bills. It can be standard procedure for some leasing providers to request evidence of income. Here, one or more payslips will be sufficient.

In the same vein, credit score can impact your ability to secure a car leasing agreement. It’s therefore recommended this is checked before applying. Alternatively, some lenders allow for a guarantor to be nominated. This person is responsible forsubmitting payments in the event that you can’t and will also have to sign the contract.


Is leasing a car different to PCP?

Personal Contract Purchase (PCP) is a form of car finance with a similar process to car leasing. You are afforded temporary use of a car through monthly payments. The key difference is that, with PCP, you have the option of buying the car at the end of the contract. This can be done with a larger end payment that covers the car’s minimum guaranteed future value. This valuation should be made at the start of the contract, with part of it being paid off during the course of the agreement.

Those in a PCP can also choose to return the car to the finance company or trade it in for another car on a new PCP contract. A PCP agreement can be extended, although this will be up to the finance company to decide. Due to the possibility of owning the car, PCP is usually more expensive than car leasing.


Benefits of car leasing

Croxdale cars are used for leasing due to many different reasons. This flexibility is one of the main benefits of car leasing services. As such, almost anyone can benefit from car leasing in ways that are especially relevant to their situation. For instance, we provide a huge range of vehicles from a variety of manufacturers, with leasing deals covering both personal and commercial needs. Further benefits of car leasing include:

  • An affordable way to get access to a car long-term.
  • Manufacturer warranty and road tax included.
  • Option to use a good quality car for significantly less cost than renting.
  • Flexibility in terms of mileage allowance and contract length.
  • Relatively quick and simple process.
  • Ongoing leasing support.
  • Access to a variety of car models and manufacturers.


How to get a good car leasing deal

Not all car leasing deals are created equal. They will vary depending on factors like the make of car and duration of the contract, both of which can influence price. As mentioned earlier, you may only need to use a car for certain trips during the year. This means that car leasing agreements over a certain mileage could result in wasted payments.

Similarly, going over the limits of a deal will lead to extra costs. The best advice is therefore to take stock of your situation and needs before looking at car leasing. However, here are some general tips to make a car leasing agreement work for you:

  • A lower mileage limit means lower monthly payments.
  • If you can pay more up front in the initial payment, this will lead to lower monthly payments.
  • Payments can also vary depending on how quickly the car is estimated to lose value when it’s driven. This means certain types of cars (usually cheaper ones) will produce smaller payments over a longer period.


Car hire county Durham

If you’re looking to rent a car in Durham, whether it’s new or used, the Croxdale Group can help. As a family-owned business established in 1967, we’ve got experience in providing people of all walks of life with the vehicles they need. Our dealerships stock a range of new and used cars, all of which you can buy or reserve online. This includes favourite brands such as Mitsubishi, Citroën, MG, and more.

Keep up with our latest offers by following us on social media, or simply contact us today to get on the road.