What is car leasing?

Leasing is a way of paying for a brand-new car. It aims to be as simple and cost-effective as possible, by giving you a fixed monthly payment for an agreed length of time, usually two to four years. You'll sometimes hear it called "Personal Contract Hire" (PCH). As that name suggests, it's essentially a way of 'renting' the car for as long as you want it, without some of the hassles of owning a depreciating asset. It’s also a way of keeping as many of your motoring costs as possible in one place. A lease contract is usually structured with an upfront payment, sometimes called the "initial rental", then a fixed monthly amount for the length of the contact. That amount is calculated based on various factors including the list price of the car, how big an initial payment you want (usually between three and six times the monthly payment), the mileage you think you’ll do every year, and whether you want a maintenance package – more on which shortly. The difference between a PCH lease contract and the other main way of financing a new car, a Personal Contract Purchase (PCP), is that with a lease there’s no option to buy the car at the end of the initial term - no big ‘balloon payment’ to think about like there is with a PCP. You simply hand the car back at the end of the contract.