Let’s talk about leasing a car


Leasing a car

The number of ways to finance a new car is continually growing, with lease (also known as Personal Contract Hire (PCH)) agreements becoming increasingly popular. The process of leasing a car involves signing an agreement with a broker for the long-term hire of a new vehicle. When the agreement ends, you will return the car to the dealer.

Are you in the market for a car lease deal?

The UK now has the third biggest vehicle leasing market in the world, with 91.2% of new cars in the UK being bought using lease agreements or similar finance options. With the impact of COVID-19 and Brexit, among other factors, a surge in lease deals has occurred in the UK. In these uncertain times people are opting to postpone many high value purchases, and so the option to get a new car with manageable monthly repayments is increasingly appealing.

What is leasing and how does it work?

Upon signing an agreement the broker will loan a vehicle to you for an agreed monthly repayment, over a set term with a pre-agreed milage allowance. Usually, you would be asked to pay a deposit at the start of the agreement which is most commonly the sum of 9 monthly payments. All of these factors vary from broker to broker, so it is worth carefully reading the details of any deals you may find to ensure the milage allowance, lease duration, upfront deposit and monthly repayments are right for you. With a lease agreement, the broker would remain the registered owner of the vehicle and you would become the registered keeper for the duration of the agreement. You will not own the vehicle.

Leasing a car vs buying a car

There are benefits to leasing a car and to buying a car and ultimately, it comes down to individual circumstances and personal preference. Below is a table highlighting the benefits of leasing a car vs buying a car.

One of the main reasons that leasing has become so popular is the ease of swapping your vehicle for a new one at the end of the agreement. Once you reach the end of your term, your broker will contact you to arrange a vehicle inspection. As the car isn’t owned by you during the duration of the lease agreement, the broker will expect the car to be returned free of damage. There is, however, an exception for minor damages that fall under the BVRLAs Fair Wear & Tear Guide. You may incur charges for any damages to the vehicle, or if you have exceeded your milage allowance.­­­


End of term options

Some brokers may offer additional options at the end of your lease deal. For example, Volkswagen Financial Services are offering up to 6 month extensions on expiring lease agreements due to the effects of COVID-19 (this may vary based on your agreement). There are no additional charges, the monthly repayments remain the same and the mileage allowance is adjusted on a pro-rata basis based on the existing agreement. If you’re coming to the end of your lease agreement and don’t want to commit to buying a new car or agreeing a new lease, it could be a good idea to contact your broker and see what options are available.

We hope this has given you an insight into PCH agreements and provided you with the necessary information to decide if this option would suit your circumstances. Our future blog posts will all be posted on our news page, and you can also subscribe to our fortnightly emails.

For more information, visit www.no1copperpot.com/lets-talk-about-money/

Subscribe to our monthly “Let’s talk about money” newsletters here!