The Definitive Car Leasing Guide

Most people think car leasing is pretty complicated and I get why they think that. It’s full of buzzwords and jargon like Guaranteed Minimum Future Value, Guaranteed Asset Protection and P11D values, which no one really understands.

Well, that’s all about to change! In this blog, we’ll teach you everything you need to know to get you on the roads!

Let’s get started.

Most Popular Car Finance Options

In the UK, there’s around about 30 million cars on the road. That’s roughly one car for every two people. And there’s three main ways motorists pay for them: hire purchase (HP), contract hire (leasing) and personal contract purchase (PCP).

Here’s a super quick overview of all three.

  • Contract Hire: With personal contract hire or business contract hire, you make an initial payment (like a deposit) and then make regular monthly payments for the length of the contract, typically lasting two to four years. The amount you pay usually only covers the depreciation of the car. At the end of the deal, you give the car back. (Watch out as the rules are slightly different for PCH and BCH.)
  • Personal Contract Purchase: With personal contract purchase, you pay a deposit and then make regular monthly payments for the duration of your contract, usually between two and four years. At the end of the deal, you can buy the car by paying a large balloon payment or give the car back.
  • Hire Purchase: With hire purchase, you pay a deposit (usually between 10% and 30% then pay off the remainder of the car’s value in regular monthly payments. Once you make your final payment, ownership of the car officially transfers from the finance company to you.

All three finance options have a range of advantages and disadvantages so it’s important to carefully weigh up your options before making a final decision. For a snapshot of the differences, check out our blog post PCP vs PCP vs PCH.

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The Car Leasing Ordering Process

When you break it down, there’s only five basic steps in the car leasing process to get you from looking to leasing. They are:

  • Ask for a quote
  • Complete a credit check
  • Confirm your order
  • Sign your finance agreement
  • Confirm delivery

Seriously, that’s kind of it. You get a quote, pass your credit check, place your order, sign your finance agreement and, finally, take delivery of your new car.

Admittedly, things are a touch more complicated in practice. For a more in-depth look, check out our blog ‘How Does the Car Leasing Ordering Process Work?’.

When you're leasing a car, you'll also have to deal with stuff like optional extras, delivery lead times and leasing with poor credit. But don't worry, we deal with it all in this section.

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Car Leasing and Insurance

So, you’ve found your perfect car, decided your car finance option and you’re about to sign on the dotted line, that’s the car leasing process sorted, right?


You’ve got car insurance to think about too – unless you’re looking for a stay at Her Majesty’s Pleasure.  Whilst insuring a lease car isn’t all that different from insuring any other car, there are a few things to think about. This section explores some of them.

In this section we look at the three main types of insurance: third party; third party, fire and theft; and fully comprehensive.

  • Third party: The most basic form of coverage. You are covered against the costs of repairing damage to another driver’s car. You aren’t covered for damage to your own car.
  • Third party, fire and theft: You’re covered for the cost of damage to another driver’s vehicle, as well as damage caused by fire to your own car or the cost of replacing your car if it’s stolen.
  • Fully comprehensive: The best coverage you can get and a combination of the first two – you’re covered against the cost of damage to another driver’s car and your own if you’re at fault in an accident, as well as damage caused by fire and the cost of replacing your car if it’s stolen. You might also be covered against damage caused by weather conditions and other freak events.

We'll also look at something called Guaranteed Asset Protection (GAP) insurance, which covers the difference between the list price of the vehicle and the amount the insurer is willing to pay out. Most leasing brokers will insist that you have GAP insurance in place so keep an eye out for this section.

Finally, we'll come onto the subject of what you should do if you are ever (unfortunately) involved in a crash. The short answer is:

  1. Stop the car
  2. Decide if you need to call the emergency services
  3. Exchange details with the other driver
  4. Contact your insurer

That sounds pretty simple but there's a bit more to it than that. For a full explanation of what to do when you crash, check out our blog post here.

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Company Cars and Taxes

Company cars used to be a simple idea. A business bought or leased a car and gave it to an employee for their personal and business use.

Well, it ain’t simple no longer.

Frustrated at the lost tax revenues, HMRC recently introduced a load of new legislation designed to clamp down on company cars. Nowadays, you've got two choices

  • Company Car: A company car is a vehicle offered to you to use for business purposes by your employer. The employer owns and maintains the vehicle and you can sometimes drive the company car for personal usage, but this depends on the company’s policy. While they aren't as popular as they once were, company cars still have a bunch of advantages.
  • Company Car Allowance: The company car allowance is a cash alternative to the traditional company car. While the company car used to be favoured, recent legislative changes have resulted in the tax-saving benefit of company cars being axed. This is the main reason that company car allowance has gained popularity over the last few years.

Even though the company car allowance (cash option) is the more popular of the two, they both have individual advantages and disadvantages that I deal with in more detail in this section. (With a little help from a couple of accountants for the complicated stuff!)

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