Car Leasing

Leasing a vehicle is a little like renting a house or flat in that you sign a contract to pay a monthly fee for the car over a set period, at the end of which you hand back the keys to the leasing company.

Unlike car hire, where you rent a car for perhaps a day or a week, car leasing is like long-term renting and sometimes includes the option to buy the vehicle over time.

What's great about leasing is that you don't need to worry about the car losing value as it ages, because you don't own it. This also means you don't have to go through the hassle of selling it once you're finished with the car, as you can simply hand the keys back to the dealer at the end of the agreed term.

In fact, leasing means you can be driving a new model every couple of years if you like, which means you'll never have to worry about the car being out of warranty.

With some car leasing deals you can even pay extra each month for maintenance costs, so that if any problems should arise with the car, you won't have to find the money to repair it.

Of course the downside of car leasing is that you won't own the car at the end of the agreement, unless you have the option to buy the car and choose to do so. Also, car leasing deals often also come with mileage restrictions - charging you by the mile if you exceed those restrictions.

Clearly there's a lot to consider when it comes to leasing, so here's a look at how it works in more detail.

Vehicle leasing can be a good option for businesses as leasing payments can be declared as tax-allowable expenses. VAT registered businesses can also reclaim 100% of the VAT if the vehicle is used exclusively for business or 50% if it is also used privately.

As with private car leasing, however, you'll be charged for exceeding the agreed mileage on the lease, which may not be suitable for you, depending on your business.

New cars tend to have a warranty that lasts for the first two or three years, so it may not be cost effective to double up on maintenance costs.

That said, manufacturer warranties don't cover everything. Wear and tear on things like tyres and batteries are unlikely to be included so it is important to look at just what the maintenance payments do and don't cover.

You should also check what the penalties are for missing a scheduled payment, or for ending the lease before the contract term expires.

If you do opt for maintenance payments, find out if you will be supplied with a courtesy car should the one you're leasing be off the road for an extended period of time.

Make sure you agree to a realistic annual mileage limit. It may be tempting to under-estimate how many miles you'll do in a year to get cheaper monthly payments, but that saving could be outweighed by excess mileage charges.

Finally, as a leased car doesn't belong to you, you'll need fully comprehensive car insurance. Third party cover would only pay for damage to other people's property in the event of a claim, so you'd be left to foot the bill for repairs as handing back a damaged car to the dealer at the end of the lease can result in charges.

You shouldn't struggle to get insurance for a leased vehicle although premiums tend to be slightly higher than those where the driver is the legal owner of the car. The difference isn't huge though, about £10-15 a year, so if you think leasing is more appropriate for you it's probably worth paying.

You'll be able to choose a car from a range of manufacturers and models. The more expensive the car you choose, the higher the monthly lease payments are likely to be. However, there are a number of factors which affect the amount you'll pay.

The key is depreciation, as cars which hold their value best will cost the dealer less over time and therefore cost less to lease each month. Cars which lose the most value have the highest monthly leasing fees, as the dealer will want to recoup their loss.

You'll be asked to agree on a contract outlining how long you will be leasing the car for, how many miles you drive each year and how much you are expected to pay each month for the lease and, if you want, maintenance.

The annual mileage part is important because the more miles a car does, the more its value drops - so estimating an annual mileage gives the dealer an indication of how much the car will depreciate over the course of the lease.

The dealer will charge you a set fee, outlined in your contract, for every mile you drive above the agreed annual limit.

Generally, payments are taken directly from your account via Direct Debit, so you needn't worry about missing a payment.

When you start the lease you usually have to pay a deposit equal to two or three months' worth of payments and many lease agreements will charge an additional fee if you choose to get out of the arrangement before the end of the agreed term.

You can find a great deal on hundreds of different makes and models of vehicle through these UK car leasing companies. Whether you are looking for personal or business based car leasing agreements; you can take a look at car leasing deals available through these providers.

We want to show you as many car leasing companies as possible, so you can find the right deal for you. We can’t promise to show you every single company, because some don’t want to be included on comparison websites. MoneySuperMarket doesn't offer a comparison service for this type of product but we have compiled a list below of providers who can help. You can find out more about how we work here.

Leasing can be a cost-effective and hassle-free way to get behind the wheel, especially if you are after the newest car model but can't afford it outright, or don't want to splash the cash.

But there are a lot of options to choose from when it comes to car leasing and a lot of things to watch out for to make sure you get the most suitable deal for you.

MoneySuperMarket gives you lots of clever ways to save a lot, by doing very little.

• Take control of your credit score by checking and improving it for free with Credit Monitor
• Never overpay again with Bill Manager, our energy monitoring service
• Over 50 ways to Get Money Calm

So how do we make our money? In a nutshell, when you use us to buy a product, we get a reward from the company you’re buying from.

But you might have other questions. Do we provide access to all the companies operating in a given market? Do we have commercial relationships or ownership ties that might make us feature one company above another?

We commit to providing you with clear and informative answers on all points such as this, so we have gathered the relevant information on this page.