Car leasing explained

Leasing or Contract Hire (PCH is Personal Contract Hire) can be a simple way to drive your brand new car in exchange for fixed monthly payments. It is effectively a long term rental - simply agree the contract length, mileage allowance, and initial payment, and the car can be delivered to your door! You won’t own the car, and at the end of the agreement you simply return it to the leasing company.

Car leasing (PCH) vs PCP

With both PCP and PCH you pay an amount up-front, followed by fixed monthly payments. The main difference is at the end of the contract - with PCH you must hand the car back, but with PCP you have the option to pay a balloon payment and buy the car outright. PCH is a lease in the truest sense of the word, whereas PCP offers ownership options. Be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.

The initial payment is the first month’s payment which is higher than usual and calculated as either 3, 6, or 9 times the regular monthly amount. Similar to a deposit, it’s the part of the hire contract that you pay up-front. It is usually payable shortly after delivery and is non-refundable. After this initial payment in month 1, you pay the regular monthly payment for the remainder of the contract.

This is the average annual mileage limit for your hire contract. You shouldn’t exceed the total mileage for the contract length otherwise it’s likely you’ll need to pay excess mileage charges.

Exceeding the mileage limit

Most lease contracts have an ‘excess mileage charge’ if you are over the agreed mileage at the end of the contract. This is normally a ‘pence per mile’ charge which will be stated in the contract hire agreement up-front. Be sure to check this before signing.

This is the total period of your hire contract. Each month you will make a monthly payment to lease the car, and after this time you will return it.

Most leasing companies in the UK will arrange to deliver your new car free of charge. As a result, you won’t have to traipse over to the leasing company’s premises to pick up your new car – unless you want to.

New cars don’t need to have an MOT test until they’re three years old, either, so you won’t have to worry about having your car tested unless your lease agreement is longer than three years.

If you choose to lease a new car, it’ll be covered by the same manufacturer warranty as if you’d bought the car outright. As a result, if any non-consumable parts (excluding brakes or tyres, for example) you’ll be able to get them fixed at a local dealership without paying a penny. Most new car warranties last at least three years, so, if your lease agreement is three years or shorter, your car will be covered for the entirety of your lease. This will depend on the length of the warranty offered by the manufacturer of each vehicle, so will be worth checking before you sign a lease agreement.

Servicing is not included in the prices on Carwow. Some dealers can offer a lease agreement that includes maintenance - please check with the dealer when you enquire.

Insurance is not included in the prices on Carwow. You should arrange car insurance as normal for your lease car, making sure to tell the insurance company that it is leased.

Not directly, but you can sell your current car and settle any finance before using any spare funds towards the initial payment of a lease deal. Most dealers will happily give you a value for your current car and many will buy it from you.

Personal vs Business leasing

Personal Contract Hire (PCH) is for private buyers and prices include VAT, whereas Business (BCH) prices exclude VAT and are only available to companies.

Dealer vs Online Broker

Carwow works with Handpicked Trusted dealers, who have showrooms you can visit and cars to test drive. You can lease in person at the showroom, online, or over the phone. Online brokers act as sales agents on behalf of big car leasing companies. They don’t have showrooms or cars to test drive, but you can do everything online or over the phone. All Carwow brokers are FCA authorised and endorsed by at least 3 major leasing companies. Both Dealers and Online Brokers can offer great leasing deals delivered to your door.

End of lease agreement

Before your term ends, you’ll be contacted by the leasing company to arrange a day to return the car. Its mileage and condition will be checked to make sure you haven’t covered too many miles and that it hasn’t been damaged beyond fair wear and tear. Providing you return the car in an undamaged condition and you haven’t exceeded the agreed mileage you shouldn’t be liable for any surprise charges. Please check the terms and conditions of your lease for full details.

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