Drivers are really switching onto the idea of leasing, rather than buying, as it offers a simple and flexible way of driving a new car.
Long-term car leasing takes away some of that flexibility. But it also reduces the price. If you don’t mind changing cars every four-or-so years instead of every couple, there are significant savings to be made.
What is a long-term car lease and how does it work?
Leasing is a lot like renting. Fork out an initial payment (sometimes called a deposit), stump up the monthly payments, then you’re done. When the contract is completed, you hand the car back and you need to find another one.
With a lease deal there are three main variables. The mileage, initial payment, and length of contract. It’s this last point that determines whether a lease deal is long-term or not.
There’s no fixed definition for long-term leasing, but generally they’re for deals that last longer than 36 months. Most leasing companies allow contracts to be between 24 and 48 months long, but there are specialist providers in short-term leasing too.
>> Search for long-term car leasing deals
Cheapest long-term car lease
Generally, the cheapest long-term car leases start from £100 to £150 per month.
There are two different perspectives when looking at cost: cost per month and overall cost.
The cheapest monthly figures are generally offered on the higher end of the longer-term leasing deals (around 48 months) with low mileage agreements (5,000-8,000 miles a year) and largish (£1,500 and more) initial payments.
On shorter term contracts, the monthly figures are inflated compared with long-term contracts.
The figures below show typical short-term and long-term leasing deals for a Fiat 500. While the three-month deal is very flexible, it works out to be a lot more expensive in the long run compared with a long-term lease.
Typical three-month Fiat 500 deal
Monthly cost: £312 (3 payments, incl. VAT)
Initial payment: £0
Total amount payable by customer to lease car and return (excluding excess mileage charges and any end of contract charges): £936
Mileage allowance: 1,000 miles per month
Cost per year: £3,744
Typical 48-month Fiat 500 deal
Monthly cost: £108 (47 payments, incl. VAT)
Initial payment: £1,000 (plus £199 processing fee)
Total amount payable by customer to lease car and return (excluding excess mileage charges and any end of contract charges): £6,275
Mileage allowance: 12,000 miles per year
Cost per year: £1,568.75
Long-term car lease alternatives
Short and mid-term leasing agreements
Other lengths of leasing deals are available. Shorter contracts, like 24 or 36 months, are usually a bit more expensive per month, but they offer customers the chance to change cars more often.
PCP (Personal Contract Purchase)
A PCP agreement allows customers to spread the cost of a car across a deposit, monthly payments, and an optional final payment. If you want to buy the car at the end of the agreement, you pay this additional amount. If not, you can trade it in for another model, or walk away.
>> What is PCP?
HP (Hire Purchase)
The entire cost of a car is spread across a deposit and monthly payments. Once you’ve paid all of this, you own the car with nothing left to pay.
Car sharing schemes and clubs
If you want to lease a car, but your usage would be sporadic, this is a serious option as you can do it on an hour-by-hour basis.
>> Our guide to car sharing schemes
Car hire
This may seem like an extreme measure, but this is an option. Most hire companies allow you to rent for a few months, and some will even let you rent for a whole year.
Long-term car lease pros
> Better value than short-term lease deals
> Regularly change into brand new cars
> Simple to understand
Long-term car lease cons
> Can be more expensive in the long-term in comparison with PCP
> Won’t let you change cars as regularly compared with shorter-term leasing deals
> Credit score can be affected if payments aren’t kept up
Should you choose a long-term car lease?
As long as you’re aware that it might not be as good value in the long run as a PCP or HP deal or simply buying in cash, there’s no reason you shouldn’t go for a long-term lease. And it does work out as better value than short-term leasing too.
It’s one of the easiest ways of driving a new car, and it makes budgeting your monthly outgoings simple.
Further reading
>> Lease or buy a car: rent or keep?
