Car finance is simply enormous. Around 90% of new cars are financed in some way. Personal Contract Purchase (PCP) is popular, while there’s also Hire Purchase (HP). However, these methods normally tie you to an agreement for at least two years. So, if that doesn’t fit your lifestyle, there are plenty of short-term car lease deals around in the UK.
Personal leasing, sometimes known as Personal Contract Hire (PCH), is the easiest way to drive a new car. Short-term car leasing deals allow drivers to essentially rent a car for a set number of months.
Short-term leasing is generally aimed at people who can’t commit to long-term car deals. It enables people to change cars very quickly, but it is one of the most expensive ways of running a new car.
>> Search for car leasing deals
How does short-term car leasing work?
Leasing works much like renting. You stump up an initial payment, make a series of monthly instalments and, hey presto, it’s time to hand the car back.
Short-term car leasing lasts anywhere between one and 24 months. 90-day deals are out there too, and they don’t require a credit check. However, you’ll really need to put in a shift to find one of these at a reasonable rate.
Why? Monthly payments. The shorter the contract, the higher the monthly fee. Contracts that are less than 24 months long can look very pricey on the monthlies because of this.
Cheapest short-term car lease
Generally, the cheapest short-term car leases start from around £200–£300 per month. There are two different perspectives when looking at cost – cost per month and overall cost.
The cheapest monthly leasing figures are generally offered on longer-term leasing deals (48-month contracts typically) with low mileage agreements (6,000-8,000 miles a year) and fairly large initial payments.
On shorter term contracts, the monthly figures are inflated compared with long-term contracts. For instance, we’ve seen figures for Volkswagen Polos on three-month short-term contracts for around £350 per month. Mileage limits are generally higher, around 2,000 a month, and if you spec it for three months or less, generally an initial payment isn’t required.
The figures below show that while a very short-term lease, such as three months, is very flexible, it is a lot more expensive to finance over extended periods when compared with a long-term lease.
Representative 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
Representative 48-month Fiat 500 deal
Monthly cost: £100 (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): £5,899
Mileage allowance: 8,000 miles per year
Cost per year: £1,474.75
Short-term car lease no deposit
Short-term car lease deals are available – but there’s a but. Usually you’d pay an initial payment at the start of a deal. With no deposit deals, generally this payment is just factored into your monthly payments.
>> Read more on car leasing with no deposit
Should you choose a short-term car lease?
You should opt for a short-term lease if you need a car for a short period of time, and you know you’ll use it a lot during that short period.
If you need a car for long-term commitments, say more than three months, longer-term leasing deals are better value for money. If you’re not bothered about changing cars every few months or years, PCP (Personal Contract Purchase) or HP (Hire Purchase) are forms of car finance you should also consider.
There are plenty of alternatives, too.
Short-term car lease alternatives
Renting a car
> Of course, while renting a car is not the cheapest way of driving, it’s worthwhile considering, especially if it’s for a month or less.
> Most car hire companies will let you rent for a few months, and some will even let you rent a car for a year. If you really only need a car for a month or two, it’s worthwhile checking out rental car prices, as they can work out cheaper than leasing.
> It also prevents you from entering a potentially complex financial agreement with a leasing company.
> One important question to ask yourself about short-term rental. Do you need a car EVERY day for a period of time? If you think you need a car for, say, three months, and out of that, you only use it two times a week, then car clubs like Zipcar and DriveNow can be helpful. Cars can be rented hourly, too, with prices starting from as little as £5 per hour.
> Car clubs usually get you access to electric cars too, which are generally more expensive to lease than petrol ones.
> A word of warning, though. Some car clubs charge an annual membership, and they are mostly prevalent in built up cities.
Buying a cheap car
> Leasing is not the most cost effective way of driving a car. Essentially after you’ve paid off all of your payments, you hand the keys back and have to start again.
> One way to save money is to simply spend the money you would have on payments on a cheap used car. Sure, you have to pay VED (Vehicle Excise Duty), and it won’t be quite as nice as something you’d get on a lease, but if you really are only keeping it for a few months, you might just get that money back.
>> How to find cheap car finance
Short-term car lease pros
> Simple to understand
> Easy to switch cars
Short-term car lease cons
> Can be an expensive way to have a car for a short period of time
> As with any financial agreements, credit rating can be affected if you don’t keep up payments.
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