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How car lease payments are calculated

Whether you’re new to leasing or are a regular customer of Nationwide Vehicle Contracts, you may be wondering how our new car lease deals are calculated.

There are several factors that can affect the lease price, which is why prices and deals fluctuate so often. But how do you know if you’re getting a good deal and is there anything you can do to bring the lease price down?

To help you understand how our pricing works, Nationwide Vehicle Contracts has put together a short guide on how car leasing payments are calculated, how often they change and how much flexibility you have when it comes to price.

cars in mercedes-benz dealership

How are car lease prices calculated?

The price you pay each month for your brand-new lease car or van depends on several factors. The price of a lease agreement is usually determined by:

  • The cost of the vehicle (also known as purchase price or OTR value)
  • The contract terms (such as the length of contract, annual mileage and initial rental)
  • The anticipated residual value of the vehicle (how much the vehicle is likely to be worth at the end of the contract)
  • The estimated depreciation value of the vehicle (the difference between the car's value at the start and end of the contract)
  • Any additional support from the manufacturer or funder
  • Additional contract options (such as a maintenance package)

Unlike a purchase agreement in which your monthly payments contribute to the cost of the vehicle, with a contract hire agreement your monthly payments cover the cost of the depreciation of the vehicle over the lease period. This means that, in conjunction with the factors listed above, the higher the value of the car at the end of the contract, the lower the monthly payments.

Why do car lease prices vary between providers?

All vehicles leased with Nationwide Vehicle Contracts are supplied by the vehicle manufacturer's franchised UK dealer network, so you may be wondering why our lease prices are different than ordering from a dealership directly? The answer comes down to the relationship we have with both the finance provider and the manufacturer.

Our busy pricing team continually:

  1. finance provider graphic

    Check prices via our panel of finance providers

    We work with over 30 different finance providers, from smaller dealer funders to bigger finance houses like Leaseplan, Lex Autolease, Arval and ALD Automotive. The team checks and compares vehicle residual values and monthly lease rates across all our providers to ensure you get the best lease deals.

  2. graphic of dealer system

    Check discounts and availability via our panel of approved dealerships

    We work with over 300 trusted suppliers across the UK. Both our sales and pricing team liaise with the dealerships directly to check incentives and rebates, stock levels and allocated build slots for factory orders to ensure you don’t have to wait too long to get behind the wheel of your new motor. 

  3. graphic of exclusive lease deals

    Negotiate exclusive lease deals

    With more than 19 years’ experience in the leasing broker industry, we negotiate exclusive deals directly with the finance providers and vehicle manufacturers. This allows us to secure several vehicles at a reduced rental, meaning you can get access to car leasing offers you can’t find anywhere else.

Whether you opt for a Mini or a Maserati, we try to offer the best price available to remain competitive in the market, however, if you see a better price elsewhere, we’ll try our best to match it. To do this, we need to see a copy of your formal quotation which includes your full name, the date, full vehicle details including the term, mileage, initial rental, colour, and any options you have included.  

How much flexibility is there on price?

Here at Nationwide Vehicle Contracts, we pride ourselves on our transparency. We were one of the first online brokers to offer transparent pricing upfront, allowing you to customise your lease vehicle online and get an instant quotation – without having to submit any personal details or speak to a sales agent. Since then, many of our competitors have followed suit.

As such, to remain competitive online, our prices are already as low as they can be. As we mentioned above, we constantly check our prices to ensure we offer the cheapest rate possible for our customers, therefore we often have little to no movement on price. This means that if you try to squeeze the sales agent for a further discount, please don’t be offended if they are unable to do this.  

On the plus side, we are a “no hard sell” business. This means we won’t bombard you with emails or phone calls after we’ve sent you a quote, giving you time to fully consider your options before committing to a deal. Just be wary that many of our leasing deals are only around for a limited time so if you really want the vehicle at the advertised rate, snap it up before it’s too late.  

Is there anything I can do to bring the lease price down?

If you’re on a strict monthly budget and are looking to get the best deal possible, there are a number of things you can do to help get the price down. 

To help get the car lease price down:

  1. graphic of car lease mileage

    1 Consider a lower mileage

    The higher the annual mileage, the more the vehicle’s value depreciates, which in turn increases the monthly rentals. Of course, you need to choose an annual mileage amount that is suitable for you but if you only plan to use the vehicle to get you to and from work, you may want to consider dropping to a lower mileage amount.

  2. graphic of high initial rental

    2 Consider a higher initial rental

    The higher your initial rental, the lower the monthly rentals. Most customers pick between three- and six-months initial rental but some finance providers allow you to pay up to 12 months upfront. It is worth noting that unlike a deposit, the initial rental is non-refundable and forms part of your lease contract. As such, paying a higher initial rental doesn’t shorten your contract term but does help to bring down the monthly rental price.

  3. graphic of payable car options

    3 Remove any payable options or paint colours

    Some additional vehicle options, such as alloy wheels, leather interior and technology packs have a price attached to them which in turn, increases monthly rental. If you’ve opted for a metallic or pearlescent paint colour, this can also increase your monthly payments so consider a zero-cost paint option to keep the rentals as low as possible.

  4. graphic stock vs factory order

    4 Consider a stock model vs a factory order vehicle

    Stock cars are new cars that have already been built by the manufacturer. Unlike a factory order, as these models have already been built, factory fit and customisation options are usually not available on these models, although you usually have a choice when it comes to colour. As such, they tend to be cheaper to lease and are usually available for quicker delivery.

  5. graphic of resale values

    5 Pay attention to resale values

    As we mentioned before, the higher the estimated value of the car at the end of the contract, the lower your monthly payments will likely be. As such, it makes sense to consider the popularity of the vehicle you’re thinking of leasing, as this will impact how the finance provider calculates its depreciation value. 

How often do car lease prices change?

If you’re interested in a car lease deal you’ve seen online, you may be wondering how long the deal is available for? Unfortunately, car lease deals can change very quickly so it pays to be prepared when looking for your next lease vehicle.

Car lease prices typically tend to change for one of the following reasons:

  • Quarterly pricing reviews
  • Stock availability
  • Discounts or rebates

Quarterly pricing reviews

Generally, most finance providers update their pricing on a quarterly basis – so January, April, July and October – although they occasionally make revisions at other times during the year due to market changes. During this time, they look at the anticipated residual value of the vehicle, as well as how many models they have on their books. If they feel they’ll struggle to sell a vehicle at the end of the lease contract, they’ll up the monthly rentals as a consequence. On the flip side, if the finance provider feels a vehicle will be easier to sell at the end of the contract, they’ll drop the prices to make the deal more attractive to lease customers.  

If you are looking to take advantage of a cheap lease deal towards the end or start of a quarter, please be aware that prices may change quickly. With over 10,000 vehicles to review, it can take a finance provider a few weeks to fully release their updated rates, which can sometimes restrict our ability to quote on some models. We appreciate this can be frustrating, but we want to reassure you that at the start of every quarter, we are working as quickly as possible to ensure the pricing on our site is accurate and up to date. 

Stock availability

Stock levels often play a big part in how long a deal is available for. When stock is available, we can usually secure a deal that allows us to advertise a lower monthly rental, but as stock is sold, offers are pulled by the finance provider and/or vehicle manufacturer and prices generally go up. Some stock deals only last a few days, while others can last a few months. It all depends on how much stock is available and the popularity of the deal with other customers.

If you are interested in a stock deal, it is worth registering your interest early to ensure you don’t miss out. You can also ask your sales consultant how long they expect the deal to last for, but please be aware that there is no guarantee that we’ll be able to secure the rate for you until you have been approved for finance.

Discounts or rebates

Another factor that can affect the fluctuating price of a vehicle is any discounts and/or rebates that are offered by the supplier and/or finance provider. Discounts and rebates can often affect the purchase price or on-the-road (OTR) value of a vehicle, helping to lower the monthly rentals. Sometimes these discounts are only available for a set period of time. When the discount period has ended, the value of the vehicle increases, and the monthly rentals increase as a consequence.

Our best deals usually only last a couple of weeks at a time so if you really want something, it pays to register your interest early.  

At what point is the car lease price fixed?

Before we can proceed with your vehicle order, you need to have completed the following steps:

  • Submitted or accepted an online quotation
  • Completed the personal or business finance application form
  • Spoken to a sales agent to go through the pre-qualification checks
  • Paid your £270 (inc VAT) processing fee

After these steps have been completed, and with your permission, we will propose you for finance with the finance provider. Most finance providers respond to a credit application within two working days however during busy periods, it can take up to five working days to receive a response from the finance provider.

Please note, until the finance provider has approved your finance application, we are unable to secure the vehicle for you at the agreed rate. This is why it is important to register your interest early as if you leave it to the last minute, the deal may have ended before the finance provider has considered your application.

Why can't you honour an earlier car lease price?

Many customers are disappointed when they miss out on an earlier lease price. We understand that this can be incredibly frustrating when this happens, but we often have no control over when an offer is pulled by the manufacturer or finance provider.

Unfortunately, we can’t honour an earlier lease price for many reasons. As we mentioned before, stock levels usually play a big part in this so as stock runs out, deals expire, and prices generally go up. The demand for an offer also plays a part. If allocation is taken, the manufacturer may pull the deal. Prices may also change with the finance provider due to the reasons we explained earlier, such as changes in the market or with residual values.

If you have missed out on an earlier lease price, we may be able to find you a deal on a similar vehicle or in the same price band, but unfortunately, we are unable to honour a earlier price because this deal is no longer available through our providers.

car leasing paperwork

What happens if I place an order and the lease price goes down?

New deals are announced by the finance provider and the manufacturer all the time, and we often don’t know what these deals are until they are released. This means that you may order a vehicle to find out that the price has dropped a few weeks or months later. If this has happened, you have several options available to you depending on where you are up to with current order.

Order in progress

If you have ordered your vehicle and have paid your processing fee but have not yet signed your finance agreement, you may wish to cancel your existing order and reorder the new deal. Depending on the stage of your order, cancellation fees may be charged.

Please be aware that as the new deal may be offered through a different finance provider, or on different terms, you may need to go through another credit check. Please note, your previous acceptance with a different finance provider is not a guarantee that you’ll be approved again, as every funder has a different appetite for risk. 

It is also worth noting that every deal is different, so it’s likely that the new offer you have seen may have different colour, interior options or have a longer lead time so please bear this in mind if taking up this option. 

In contract

If you have already taken delivery of your vehicle and wish to cancel your contract, you will need to apply for early termination. As with any type of financial contract, there is a penalty charge for ending your lease contract early. This penalty fee is set by the finance provider and depends on a number of factors. Some finance providers charge a flat fee of 50% of any outstanding rentals, while others calculate a fee on a case-by-case basis by taking into consideration the length of the contract and mileage allowance, as well as any outstanding rentals. As we mentioned before, early termination can be costly so it is advised that you consider all options before making a decision. 

Where can I find the best car leasing deals?

Ready to start leasing? Check our latest car leasing deals page for our best offers with many cars in stock for fast delivery. But be quick - these deals are only available for a limited time!

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