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How Leasing Works

Car and Van leasing is a way to drive a new vehicle without having to buy it outright. Instead, you pay a fixed monthly fee to use the vehicle for an agreed period. Here’s a clear breakdown of how it works:

Leasing is basically a long-term rental. You choose a vehicle, agree on how long you want it, estimate your mileage, and pay monthly rentals. At the end of the contract, you return the vehicle to the Finance Company (The Funder)

Most personal car leases are PCH (Personal Contract Hire), and most business leases are BCH (Business Contract Hire), but both work the same way.

If you are a consumer then the contract will be a PCH (Personal Contract Hire).

If you are a Sole Trader, Partnership or Limited Company registered with Companies House then the lease will be a BCH (Business Contract Hire)

1. Choose Your Vehicle

You select the car or van (make, model, specification, transmission).

2. Set Up the Contract

You agree on:

  • Contract length — usually 2–4 years however other lengths are available (18 months – 60 months)
  • Annual mileage — e.g., 8k, 10K, 20K miles per year (Your total mileage will be referred to as Contract Mileage)
  • Initial payment (initial rental) — often 1, 3, 6, 9, or 12 months’ worth of payments
  • Optional maintenance package — covers servicing, tyres, etc. (Link to maintenance page)

3. Credit and Affordability Check

Because it's a finance agreement, the Finance Company performs a credit check to ensure you can make the payments. The funders will also want to ensure that you can afford the monthly rentals without causing you financial hardship so you will need to be honest when completing an application form.

4. Monthly Payments

You pay a fixed amount every month. This covers the car’s depreciation over the contract period, plus finance costs and fees.

  • Higher annual mileage = higher depreciation = higher monthly cost
  • Larger initial rental = lower monthly payments

5. During the Lease

You drive the car as normal but must:

  • Keep it insured (often comprehensive insurance is required)
  • Service it on schedule
  • Keep it in fair condition (BVRLA: fair wear and tear rules)

If you chose a maintenance package, servicing and tyres are usually included, however please refer to the Funders Terms and Conditions for any exclusions.

6. Other Considerations

  • Vehicles will be road delivered (Driven) to your address. A trailered option can be facilitated but will incur an addition charge. Delivery is usually free although deliveries to Scotland may incur an additional charge.
  • All vehicles will come with a Manufacturer warranty but you must service the vehicle at the correct intervals to preserve this.
  • To obtain some discounts your vehicle may be pre-registered. (This means that the vehicle may be registered before you receive it) If this is the case the registration date will be on your order form. It is important to note that the Warranty, Service Intervals and MOT Period begin from the registration date and not the delivery date.
  • You must be the main driver of the vehicle

At the end, you typically have two options:

  1. Return the vehicle
  2. Take out a new lease

You cannot buy the vehicle outright on standard PCH/BCH leases (though separate finance products like PCP do allow this).

If you exceed your mileage, you pay an excess mileage charge, set in pence per mile.

Upon collection the Finance Company inspects the vehicle. Any damage outside "fair wear and tear" may incur charges.

Key Advantages

  • Flexible initial payment
  • Fixed term contract
  • Fixed mileage contract
  • Fixed cost motoring
  • Flexible profiles to suit you
  • Road Tax is usually included however any future changes in taxation during the lease agreement will be charged to the customer
  • At the end of your contract simply hand the vehicle back
  • Option of including maintenance with the contract
  • No depreciation or disposal risk

Key Disadvantages

  • Early termination can be expensive
  • If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract
  • You must look after the vehicle and return it in a well maintained condition otherwise you will be charged for any damage over and above that stated in the 'BVRLA Fair Wear and Tear Guide'
  • You must have fully comprehensive vehicle insurance
  • You will never own the vehicle as there is no option to buy it