How Does Leasing a Car Work

Car leasing is a long-term rental agreement for a new or used car. Instead of buying the vehicle outright, you pay to use it for a fixed period (typically two to four years), then hand it back at the end. 

The easiest way to picture it is renting a home. When you rent, you pay a deposit and then a set amount each month to live in the property. When the tenancy ends, you return the keys. Leasing a car works in a similar way. You pay an initial rental upfront (an advance rental, not a refundable deposit), followed by fixed monthly rentals for the duration of your contract, and return the car to your finance provider when the contract is up. 

The key difference from buying is the cars you can drive. Thanks to the payment structure, leasing opens the doors to cars you might not consider buying outright. You can enjoy the latest models, tech, and trim levels without the hassle and cost of ownership. 

Here's how to lease a car in a few simple steps: 

1. Choose your car: Browse our range of lease deals and choose the length of contract you'd like. You'll also need to tell us your estimated annual mileage. 
2. Pass a credit and affordability check: Because leasing is a finance agreement, the funder runs a check to confirm you can afford the payments. 
3. Pay your initial rental. This is usually the equivalent of three monthly payments and a common factor in how car leasing works. Road tax is included in the cost, so you don't need to worry about paying for that separately. 
4. Choose to add maintenance to your agreement. This will cover most mechanical or electrical repairs, scheduled servicing and more, potentially saving you money in the long term. 
5. Once you've agreed your contract, We'll deliver your car to your front door, for free (exclusions apply). If you selected an in-stock car, delivery will be much faster. Your monthly payments will then start, allowing you to drive and enjoy a brand-new car for the length of your agreement. 
6. Make your monthly rentals. You then simply drive and enjoy the car, paying the same amount each month for the length of your contract. 
7. Return the car at the end. When your contract ends, you hand the car back. You may have nothing further to pay if all rentals are up to date, you stay within the agreed mileage and the vehicle meets return standards. 

You can also choose to add a maintenance package to your contract, which covers servicing, tyres, brakes, and routine repairs. It's completely up to you whether you add it, but it's a handy extra if you don't want to deal with the fuss and cost of routine repairs. 

When you lease, your monthly rentals aren't going towards ownership of the car, which can make it much more affordable than other ways of financing one.

There's various factors that affect your payment, such as: 

• Contract terms (length, annual mileage and initial rental) 
• The car itself 
• Additional contract options, like a maintenance package

Estimated depreciation is also a factor in calculating your monthly payment. Your monthly rental covers the difference between the car's on-the-road value at the start of your contract and its residual value at the end. Because you're paying for the difference, not the car's full value, monthly rentals can be lower than some purchase-finance payments. 

If you're looking for a more detailed breakdown of car lease payments, head over to our guide: How car lease payments are calculated

The initial rental is the first (and usually larger) payment you make at the start of your lease agreement. 

They are usually quoted as a number of months' worth of payments (1, 3, 6, or 12), and the more you put down upfront, the lower your monthly payments are for the rest of the contract term. 

There's no obvious initial rental to put down, it completely depends on your financial situation and what you can afford. A bigger one lowers your monthly payments, while a smaller one keeps more money in your bank in the short term. It's about what works best for you. 

For more information on the fees involved, check out our guide: Leasing fees explained Leasing Fees Explained

Every lease comes with an annual mileage limit, which is agreed at the start. Mileage influences your monthly payment, and typically, the more miles you need, the higher your payment. 

If you do go over your agreed mileage, you'll pay an excess mileage charge at the end of your contract. This is a set rate for each extra mile and is agreed when you sign. 

Car leasing with bad credit is generally not recommended. Funders look at various things, such as your income, existing commitments and recent history, and typically require a credit score of good to excellent.  

Not sure where you stand? Our finance eligibility checker lets you get a feel for your options, while our leasing vehicles with bad credit guide explains all you need to know. 

Insurance isn't included in your lease, so you'll need to arrange your own fully comprehensive policy, and it must be in place from the moment your car is delivered, not the day after. 

For more information, read our guide: Insuring your lease vehicle