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Key questions to ask when leasing

Have you decided a car lease might be good for you?  Before you sign any agreement, make sure you know the answers to these questions:

1. What is the amount due when you sign the lease?

What is the initial payment (it should be roughly 3 x the monthly payment) and are there any administration or finance fees? Note: the initial payment is not a deposit, it is the first payment you make, and you will not get it back at the end of the contract.

2. How long is the lease?

It's common to find 24, 36, 48 and 60 month leases. But you will also find odd terms, like 40 months.

These odd-month deals can be designed to confuse you. A 40 month lease will give you lower monthly payments, but you'll pay more overall. And you might be driving for four months without a warranty - so you'd be reliable for potential costly repairs.

3. What happens at the end of the lease?

There are two kinds of leases: open-end and closed-end.

The most common is the closed-end lease (this includes Contract Hire).  You simply return the car at the end of the lease, pay any costs due and walk away.  Or you buy the car at the residual value figure stated at the start of the lease.

If the car is not worth the residual value figure at that point, you're not responsible - as long as the car has normal wear and you haven't exceeded the mileage limits.

The leasing company is guessing that they will get back a vehicle worth money to them (the residual value).  So they take on the depreciation risk, not you. This means you pay more for this type of deal.

Open-end leases are less common and are often called a Finance Lease. In this case you are doing the guessing. Your payments will be lower than a closed-end deal.

In an open-end lease, the residual value is set, but it's only considered an estimate of the future value of the car. If at the end of the lease the car is not worth the estimated residual value (which is agreed at the beginning of the contract), you pay the difference.  Therefore the risk of depreciation lies with you, not the leasing company.

Whichever lease you decide to go for, read all the small print. Make sure you are aware of any payments that may be charged at the end of the lease.

For example, will you have to pay the leasing company to collect the vehicle?  And be sure to understand the guidelines for what is considered 'normal wear and tear'.

4. What is the mileage allowance and what happens if you go over it?

Most leases have a set mileage which is agreed when you sign your contract. Your monthly payments will be based on your mileage.

Mileages are normally set between 10,000 and 30,000 per year. If you go over your mileage you may have to pay an excess mileage fee - check what this fee is before you sign any contracts. It should be between roughly 5 to 15 pence per mile.

If your circumstances change and you end up driving a much higher mileage, it is possible to amend your mileage limit.  This will however increase your monthly payments because the car will have a higher mileage and be worth less to the leasing company.

5. Do you want gap insurance?

Gap insurance will pay the difference between what you owe on your leased vehicle and what the insurance company say it's worth - if it is written off or stolen.

We would strongly advise gap insurance. Ask your leasing company about it.

6. Can you extend the lease?

You can usually keep it going, month by month at the same price. But be sure that will not change the terms of the original lease or bring potential new costs into play when you finally return it.

7. What happens if you need to end the lease early?

When you lease a car you enter a contract for an agreed length of time - usually two to three years. 

If you wish to come out of your lease early, most leasing companies will charge an early termination fee.  This will be worked out based on how long you have left in your contract and the mileage on the car.

Need more help?

We're a friendly and helpful leasing company - We take the time to find you the best leasing deals that are right for you.  Why not contact us for advice on 0845 052 5268 or ask for a leasing quote

01993 894981
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