Traditionally, you'd buy a car with a lump sum and own it immediately. But buyers are increasingly looking at other options, and personal car finance and car leasing are now far more common.
Yet despite the fact that many new cars are now leased, many drivers are just as unsure what a car lease is, how it works, and what the benefits of leasing are.
What is a car lease?
Leasing a car is a different way of getting behind the wheel of a vehicle. Essentially, it's a long-term rental or hire of a car, which is usually brand new. One of the most popular types of leasing is personal contract hire (PCH).
Unlike car finance, with leasing you don't own the car at the end of the contract and instead you return it. Plus the service and maintenance packages are different.
How does car leasing work?
There are various ways of leasing a car, whether for business or personal use. Basically, you pay a fixed monthly fee – which varies depending on car – over an agreed period and with an annual mileage limit. You often pay a certain amount upfront as well.
Come the end of your contract you hand the leased car back, and then take out another deal or just walk away.
What are the advantages of car leasing?
The key advantage of car leasing is that you get a brand new car with minimal upfront cost – usually much less than other types of car finance, such as personal contract purchase.
Other advantages include the easy process, and that you don't have to worry about the car's depreciation, which is absorbed into the monthly cost.
Providing you shop within your budget and can afford the monthly payments, leasing can be a good option.