General Guide to Leasing by Rightlease

What is Leasing

Leasing is often referred to as personal contract hire (PCH) or business contract hire (BCH). The terms are similar, differing only in whether an individual or a business is leasing the vehicle(s). You can lease cars or vans.

The best way to think about car leasing is like renting a vehicle. When you rent a car, you pay a daily rate based on the car model and other factors, and then return the car at the end of the rental period.

Leasing works similarly: you pay a fixed monthly fee to drive a new car for a set period, and then return the car when the lease term ends. There is no option to buy the car; you simply return it, and the contract is over.

You do not own the car in either example. In the rental example the car is owned by the rental company, in the Leasing example the car is owned by the finance company sometimes referred to as the funder.

After selecting the ideal car, you'll sign a lease agreement and make monthly payments to use the vehicle. You must adhere to the lease conditions, and at the end of the term, you simply return the car.

Your monthly lease cost is determined by several factors, including:

• The current value of the chosen vehicle.
• The vehicle's depreciation (the difference between its current value and its estimated value at lease end).
• Interest and fees from the lease provider.
• The lease duration.
• How the rental costs are structured—whether you pay more upfront or at the end for lower monthly payments.
• The expected annual mileage and the total mileage allowed over the lease term.

The lease agreement outlines all these factors, much like a tenancy agreement, and includes terms such as:

• The lease duration (typically between two and four years).
• Annual mileage limits.
• Total mileage limits for the lease term.
• Penalties for exceeding these limits.
• Upfront payment requirements and a monthly payment schedule.
• Procedures for missed payments.
• Options at the end of the lease term.
• Rules for early termination of the lease agreement.

How Does Leasing Work

When you lease a car, typically a new one, the contract cost is divided into equal monthly payments. The contract duration usually ranges from two to four years.

In most cases, you pay an upfront cost in the first month unless you choose a No Deposit leasing option, after which you make fixed monthly payments for the rest of the contract.

Deals are often represented by two numbers, such as '9 + 35', meaning an initial payment equivalent to nine months' rent, followed by 35 monthly payments, totaling 36 months.

You usually have many choices when leasing a car, including the make, model, and specifications. The contract will be tailored to the specific model, your estimated mileage, the contract length, and the payment structure, offering a lot of flexibility.

The leasing contract cost also depends on the vehicle's residual value at the end of the contract period.

Is Leasing a Good Option

Leasing is often the most affordable way to drive a brand-new car, especially for more expensive models, which is a key reason many people choose leasing over buying.

• It may reduce the initial outlay required
• You get a new car or van, keeping up to date with technology and style
• It removes the risk of depreciation associated with ownership
• It means you do not have the hassle of selling the car
• Road tax, warranty, and breakdown are included
• And you can include maintenance, including servicing and tyres 

Are There Any Potential Issues

Leasing may not be the best choice for everyone and we are here to guide you through the process and options.

• There are other options that are easier to terminate during the contract
• There will be limits to the number of miles you do in the contract, and there will be additional charges known as excess mileage if you do more than the contract stipulates
• You cannot customise the vehicle e.g. go faster stripes
• You are responsible for maintaining the vehicle in a good condition
• You have to look after the vehicle and return it at the end of the lease in good condition

Business Leasing

Car leasing isn’t just for individuals—it's also an excellent option for businesses of all sizes. Whether you need a few cars for a sales team or an entire fleet, business car leasing deals can save you time and money while ensuring your vehicles are safe, comfortable, and valuable.

Rightlease have deep expertise in the area of business leasing and fleet.

Similar to personal car leasing, business car leasing is one of the most affordable ways to obtain a new vehicle. Low initial rentals and affordable monthly payments make leasing a cost-effective option for all kinds of businesses.

A business car lease provides fixed monthly costs, allowing you to accurately forecast and manage cash flow for your fleet. These fixed costs also give you peace of mind, knowing your expenses won't fluctuate each month.

At Rightlease, we are experts in fleet and business and we're often asked, “Can I claim back tax on a business lease?” The answer is yes! Besides being generally cheaper than buying a vehicle outright or through car finance, businesses using car leasing can reclaim some VAT on their company vehicles, provided the vehicles are used solely for business purposes.

When your business leases a vehicle, you can claim a car lease tax deduction, including up to 50% of the VAT on your monthly lease payments. VAT on consumer goods typically ranges between 15% and 20%, meaning you can claim a discount of up to 20% on your lease payments. Additionally, lease payments can be written off as a non-taxable business expense.

However, certain stipulations can affect the amount of tax you can reclaim, primarily related to vehicle usage. If your company vehicles are used for personal purposes, even occasionally, you can only claim back 50% of the VAT on your lease payments.

For our business leasing customers, we handle all the documentation and registrations on your behalf. Managing the paperwork for one car, let alone an entire fleet, can be time-consuming and complex. We take care of all the documentation and paperwork related to leasing your business vehicles, freeing up your time for more important tasks.