Step-By-Step Guide To Car Leasing (2022)

What is car leasing? How does it work? And is it better than buying? If you’re looking for answers to these questions and more, this guide is for you!

Car leasing provides an affordable way to drive your dream car without buying it outright. However, if you’re new to the world of vehicle leasing, there’s a lot of information to digest before you choose your new car.

So, to make this process straightforward, our guide to car leasing takes you through the key steps to ensure this option is right for you.

What does car leasing mean?

Car leasing basically means renting a brand-new car or van from a car leasing company for an agreed period and cost.

How does car leasing work?

Similar to renting, you pay fixed monthly payments over a contracted period. Plus, you agree on annual mileage for the term of the agreement. Once your contract is up, you hand the vehicle back and can move on to your next lease if you wish.

Car leasing process step-by-step

The process for leasing a car is typically straightforward and quick. You could be driving around in your new vehicle within a few weeks. Here’s a rundown of the process from start to finish:

Step 1: Finding your dream car

Searching for your ideal car is simple. For example, at Leasing Options, we have a wide variety of models to choose from. You can filter by:

(Video) How to negotiate a car lease (step-by-step)

  • Model
  • Manufacturer
  • Fuel type
  • Budget
  • In-stock vehicles
  • Special offers

This narrows the search and displays the deals and offers available for your selection.

Step 2: Get a quote

When you’ve chosen the right car for you, it’s time to delve into the finer details. This involves selecting the length of the contract, annual mileage allowance and any extras you want to add, such as insurance or maintenance packages.

You can enquire easily through the website or contact our team to get a quote.

Step 3: Applying for finance

The next step is to apply for finance for your lease agreement. Finance providers will undertake a credit check to ensure you meet the relevant criteria. At Leasing Options, we have access to a number of funding options suited to your needs. This allows you to explore the best value deals when paying for your next car.

Step 4: Place the order

Once your finance agreement is in place, a dedicated Account Manager will get the paperwork sorted, so you can check everything before placing the order. Reading through the details and terms of your contract before signing is vital. Also, be sure to ask any queries or questions if you’re unsure.

Step 5: Sign the finance agreement

When you’re happy with the order and finance details, it’s time to sign on the dotted line. You may receive these by post. However, to speed up the process, your Account Manager can send everything via email, allowing you to sign the contract digitally.

Once you’ve signed, all finance agreements have a cooling-off period of two weeks. This means if you change your mind, you can cancel it within this timeframe.

Step 6: Delivery of your new car

Now the fun part! With the paperwork signed and sealed, your car can be delivered to you. How quickly your lease car can be delivered is subject to a few factors. If the vehicle is in stock, you may only have to wait a few weeks. However, some models have a longer lead time and are delayed by supply issues.

(Video) Car Leasing Made Easy

Aspects such as the popularity of the model, the time of year and factory location may also play a part in how quickly you get your new car.

At the start of your car leasing journey, your Account Manager will advise on how long it takes to deliver specific models. You will also be kept in the loop should things change between the order and delivery date.

Optional step: Part-exchanging your current vehicle

With many leasing deals, you have the option to trade in your existing car and put the money towards your new one. For example, at Leasing Options, our part-exchange service gives you a free quote within minutes. Then, if you’re happy, our partners will collect it and release payment, usually within 7-14 days.

How much is it to lease a car?

The beauty of car leasing is there is a range of offers to suit every budget. Below are some examples of current lease deals:

Low-range monthly payments

  • Seat Ibiza – from £173.99 per month
  • Vauxhall Corsa – from £184.99 per month

Mid-range monthly payments

  • Cupra Formenter – from £269.99 per month
  • BMW 2 Series Gran Coupe – from £349.99 per month

High-range monthly payments

  • Porsche Cayman – from £579.99 per month
  • Tesla Model S – from £1043.99 per month

* The above prices are subject to change

(Video) How to Lease a Car in 2022 (Step-by-Step) | Pros, Cons, & Fees Explained

Is leasing a car a good idea?

Leasing a car is a financial commitment and should be carefully considered according to your budget and lifestyle commitments.

However, there are numerous benefits to car leases over buying a new vehicle outright. In this instance, you don’t have to outlay a significant amount of money to drive the latest cars.

Also, leasing is an affordable alternative to other finance options, such as PCP, as these require larger deposits and a balloon payment at the end of the contract.

What’s more, leasing deals with Leasing Options include a host of extras at no cost, including:

  • Free car delivery to your address
  • Road tax
  • 12-month breakdown assistance
  • Option to part-exchange your current vehicle

Like any car finance, leasing has pros and cons to consider:

Pros and cons of leasing a car

Pros

  • You’re often able to afford a better car for your budget
  • Affordable monthly costs with the option to lower these with a larger initial deposit
  • Fewer maintenance costs
  • No resale hassles
  • Don’t have to worry about depreciation or interest rate changes

Cons

  • Terminating your contract early incurs a termination fee
  • If you go over your annual mileage allowance, you incur an excess mileage charge
  • Any damage above ‘fair wear and tear’ is charged to fix

Leasing vs buying: Which is better?

Buying a car outright requires a significant investment from the outset. However, while you own the vehicle, it depreciates quickly in the first three years – with most models falling even further by ten years old. There’s also the hassle of selling your car when you want to upgrade.

Of course, there are some benefits of buying over leasing. First, you don’t have to worry about annual mileage, although excessive miles will depreciate your car further. Plus, there are no monthly payments as you’ve already paid upfront for the vehicle.

However, if you cannot afford the purchase price of a brand-new vehicle in one go, leasing has several advantages over buying. These include:

(Video) How To Lease A Car With No Money, $0 Down In 2022 (Step By Step)

Affordable monthly costs

You choose the deposit amount, which determines the subsequent monthly payments. Again, this is flexible to suit your budget.

Get a better model for your budget

Leasing a brand-new car is often more affordable, opening up a better range of vehicles for your budget. What’s more, the depreciation is paid in the lease period rather than the entire life of the car, so payments often work out slightly less.

Fewer maintenance costs

Most car lease agreements last two to three years, so you don’t have to worry about extensive repair bills. You can also opt for maintenance packages added to your monthly payment to cover regular servicing.

What happens at the end of a car leasing contract?

In most cases, you return your car to the leasing company at the end of your lease.

Before the end of your contract, it’s essential to check over the vehicle to ensure it meets the ‘fair wear and tear’ policy. If you hand the car back with excessive damage, then you’ll have to pay to rectify it.

Fair wear and tear is set out by your leasing company and follows the BVRLA Code of Conduct guidelines. It typically covers things like minor bumper scratches, small chips and shallow scuffs. Anything outside of this is calculated, taking into account the damage and further depreciation of the vehicle.

When the car is collected, a representative of the leasing company assesses it, and any charges are communicated to you with a full report.

Alternatively, if you’re interested in purchasing the lease car, this usually depends on the type of finance agreement you have. At Leasing Options, we offer a variety of plans to suit your needs. So, in this case, opting for an arrangement that allows you to purchase the vehicle for an agreed price at the end could be suitable.

(Video) How to Sell a Leased Car - Step by Step Guide

Leasing with Leasing Options

If you’re considering leasing your next car, Leasing Options can help simplify the process. We offer affordable deals from top brands, including Vauxhall, BMW and Nissan, plus many more. In addition, lease finance packages are tailored to your budget and needs, giving you more flexibility in choosing your dream car.

For more information about our simple car leasing deals, contact our team, who’ll be happy to answer your questions.

FAQs

What are 4 major disadvantages to leasing a car? ›

Cons of Leasing a Car
  • You Don't Own the Car. The obvious downside to leasing a car is that you don't own the car at the end of the lease. ...
  • It Might Not Save You Money. ...
  • Leasing Can Be More Complicated than Buying. ...
  • Leased Cars Are Restricted to a Limited Number of Miles. ...
  • Increased Insurance Premiums.

What are at least 3 disadvantages of leasing a vehicle? ›

Disadvantages
  • No equity/ownership in the vehicle.
  • Potential early termination liability.
  • Potential end-of-lease costs like excess wear and tear and additional.
  • Mileage charge.

What are the next steps after leasing car? ›

At the end of a lease contract, you simply hand back the car to the finance company who collect it for free. If the vehicle is in good condition, you will not pay damage charges. You can then choose a new lease agreement on your next car or look elsewhere.

What length of car lease is best? ›

The typical length of a car lease contract is over 36 months, with around 40% of Leasing.com users opting for this plan. It is also worth adding that the most popular payment profile in 2020 is a 3-month initial payment over 36 months. This is considered the sweet spot of leasing.

Why leasing a car is smart? ›

Benefits of leasing usually include a lower upfront cost, lower monthly payments, and no resale hassle. Benefits of buying usually mean car ownership, complete control over mileage, and a firm idea of costs. Experts generally say that buying a car is a better financial decision for the long term.

Why are car leases so expensive now 2022? ›

New car leases are more expensive due to a significant change in market conditions. An inventory shortage is making it harder to find popular vehicles, and manufacturer incentives are down.

What's bad about leasing a car? ›

Additional costs to consider: Leasing a car comes with plenty of expenses, from the upfront fee to the monthly payment, and sometimes, additional fees when the lease ends. You're in charge of paying for gas, possibly some repairs and car insurance, which can cost more for leased cars.

Is it better to finance or lease a car? ›

In general, leasing payments are lower than finance payments. When you lease, you're not paying for the entire vehicle but rather the value you use up for the time you're driving it. In the short term, based solely on monthly payments, it's typically cheaper to lease than to finance.

What are three benefits of leasing? ›

What are the benefits of leasing a car?
  • Lower monthly payments. ...
  • Less cash required at drive off. ...
  • Lower repair costs. ...
  • You don't have to worry about reselling it. ...
  • You can get a new car every few years hassle-free. ...
  • More vehicles to choose from. ...
  • You may have the option to buy the car at the end of the lease.

Can you return a leased car early? ›

When you terminate your car lease ahead of the agreed upon date, you may face additional fees and penalties that may cost you more than keeping the car through the full lease term. If you only have a few months left on your lease, you may decide that it is better to wait until the term ends before returning your car.

Do you get money back at the end of a car lease? ›

In both a car lease and a loan, the down payment is only refundable if you don't sign any paperwork. Once you sign all the documents, the deal is done and you can't get your money back. But, if a lender requires you to make a security deposit, know that you could get that money back.

What happens if I don't return a leased car? ›

Failing to return your lease car on the agreed date will undoubtedly result in hefty end of deal fees. If there's no communication with the provider to tell them you can't make a particular because of an emergency, for example, the finance house will likely repossess the vehicle.

Is it better to lease a car for 24 or 36 months? ›

Conclusions. 24-month leases may offer additional flexibility, but most shoppers will find they cost a lot more money when it comes to monthly payments. If your priority is monthly affordability and getting more for your money, you'll probably find a 36-month contract to be a smarter choice.

Is it better to lease for 36 months or 48 months? ›

Lease Terms & Duration

Typically lease durations are 24, 36, or 48 months. Do not sign up for a lease beyond 48 months. Actually anything beyond 36 months is pushing the value of the lease. Don't let the car salesman get you into a longer lease just because they make your monthly payments look more attractive.

How do you win a car lease? ›

Tips That Can Make Leasing More Flexible but Less Expensive
  1. Save on interest by making multiple security deposits.
  2. Arrange a one-pay lease to save some cash.
  3. Extend your lease month to month until you are ready to get your next car.
  4. Exit a lease early with no penalties.
  5. Customize the mileage to suit your needs.
20 Sept 2022

When should you lease a car? ›

The best time to lease a car is soon after a new model has been released, as this is when a car's value after depreciation is highest. This means that you'll pay less in monthly payments for a vehicle over the course of a lease agreement.

What are the pros and cons for leasing a car? ›

Leasing eases the monthly cost to a more manageable number. It also allows you to drive a more luxurious vehicle than you might otherwise be able to afford. But keep in mind the mileage restrictions and potential excess wear-and-tear charges that come along with leasing.

What is the average car payment in 2022? ›

The average monthly car payment for new cars is $667. The average monthly car payment for used cars is $515. 38.22 percent of consumers financed new vehicles in the second quarter of 2022. 61.78 percent of consumers financed used vehicles in the second quarter of 2022.

Are car lease prices dropping? ›

The share of automobile transactions that involve leases fell in July to 18%, down from 27.2% a year ago, according to Edmunds.com. Deals on leasing are minimal, pushing up the average monthly payment to $594 last month, an increase from $575 in June and the highest in Edmunds' database.

Is it better to pay cash for a new car or finance? ›

Paying cash for your car may be your best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing. However, keep in mind that while you do free up your monthly budget by eliminating a car payment, you may also have depleted your emergency savings to do so.

Is a car lease tax deductible? ›

In short, yes! Car lease payments are considered a qualifying vehicle tax deduction, according to the IRS. With that being said, there are restrictions on who can and who can't write off this common business expense.

Does Car Lease save tax? ›

Tax benefit: The lease amount you pay for a vehicle is eligible for tax relief. Leasing a vehicle could help you save as much as 30% on your taxes. This is applicable for self-employed as well as salaried professionals.

Can you smoke in a leased car? ›

Answer provided by. There are usually no rules against smoking in a leased car, although it's a good idea to check your lease contract first. Some dealers will charge a cleaning and maintenance fee if you return a leased car with smoke residue inside.

Can I trade in a leased car? ›

Can You Trade in Your Lease? Yes, is the quick answer. However, don't consider trading it in unless the vehicle's current market value (book value) exceeds the remaining payments plus any early termination fees and penalties.

Does a lease count as a loan? ›

Yes, car leases count as debt from the point of view of mortgage loan providers. Student loans, credit card minimum payments, and personal loan payments also count as debt.

What are two disadvantages of leasing a car? ›

There are five big disadvantages of leasing a car.
  • You'll Always Have a Car Payment. Most lease contracts are around two to three years long. ...
  • It's Hard to Get Out of a Lease. ...
  • Modifications Aren't Allowed on Leased Vehicles. ...
  • There are Mileage Limits: Frequent Drivers Beware. ...
  • Bad Credit Borrowers May Not Have a Chance.
28 Feb 2021

What are 5 advantages of leasing a car? ›

Leasing Pros:

You have lower monthly payments with a low — or no — down payment. You can drive a better car for less money. You have lower repair costs because you are under the vehicle's included factory warranty. You can more easily transition to a new car every two or three years.

How can I get out of a 3 year car lease? ›

How To Get Out of a Car Lease Early
  1. Option 1: Transfer the Lease. A lease transfer (or swap) is one of the most beneficial ways for a leaseholder to terminate their car lease before the term has expired. ...
  2. Option 2: Lease Buyout and Sale. ...
  3. Option 3: Trade in the Car. ...
  4. Option 4: Lower or Suspend Payments.
11 Nov 2021

How much is early termination fee for car lease? ›

How Are Termination Fees on Car Leases Calculated? This can vary from contract to contract. As a general rule, early termination fees are approximately 50% of the outstanding payments.

Can you lower payments on a lease? ›

Once a lease has been signed, there's no way to change the monthly payments that are specified in the contract between you and the leasing company. You can't renegotiate your lease in the same way you can refinance a car loan.

What happens when you are under your miles on a lease? ›

Under-mileage: If your estimated mileage will be under your allowance, you can just return the vehicle at the end of the lease. If you purchased additional mileage (but didn't use it), this is often refundable, but there is no credit for being under the mileage in the lease contract.

What if my car is worth more than the residual value? ›

If the car is worth more than the residual value, you can sell the car and keep the difference. The lease residual value is the anticipated wholesale value of the car. If you sell the car at or near retail prices, you could make a tidy profit.

Can I sell a leased car to Carmax? ›

Yes! In most cases, you can sell your leased car in almost the same way as any other financed car. We'll appraise the car, then contact the leasing company for a payoff quote and process any equity you might have.

Do you pay for a service on a lease car? ›

It's entirely your responsibility to maintain the vehicle during your lease. That means covering the cost of repairs if needed and paying for services and MOTs, if applicable. As part of your lease agreement and following the manufacturer's warranty's terms, you have to keep the vehicle serviced.

Can you change your mind after signing a car lease? ›

In general, you can't change your mind after signing a car lease. The second you sign the contract for your vehicle, you must comply with its terms. There are a few situations where cancelation is possible, notably when vehicles are recalled or if the dealership had you sign a fraudulent lease.

What happens if you lease a car and lose your job? ›

You will have to ring your finance house and get the early termination figure and the purchase price. Then, go to a bank or a vehicle broker (who knows what they are doing) and they may be able to offer you a refinance option to buy the vehicle. This could be up to five years and the monthlies could be less.

What is the 1% rule in leasing? ›

The 1 percent rule is a formula that says the monthly rental should equal at least 1 percent of the total cost of an investment property to return a positive cash flow. So if there are renters currently in the investment property who are currently paying $1,500 or more, the property passes the test.

Is a 2 year lease a good idea? ›

You can avoid rental rate increases.

In most cases, your landlord cannot increase your rental rate for the duration of your one-year lease, so when you sign a two-year lease, you're usually extending the life of your current rental rate. This isn't always the case, however; laws vary by city and state.

Is a 2 or 3 year lease better? ›

Generally speaking, 36 months will usually be a better lease than 24. 36 months is more favorable for spreading out acquisition fee, document fee, dealer fee, etc. Depending on the state, taxes may or may not matter. Most people would probably rather get in a new car every 2 years than 3 years.

What is a good APR for a lease? ›

The lower the money factor, the less interest you'll pay over your lease term. Generally, a money factor of 0.0025 and below (the equivalent of 6% APR) is considered a good rate.

What is a good lease term? ›

One-year leases are by far and large the most popular length for leases. They're good if you have high-quality tenants and an effective tenant screening process in place. In this case, year-long leases are good because it secures good tenants for a long period of time.

Why is a longer car lease more expensive? ›

However, due to the interest charges, known as the money factor in car lease terminology, and the greater likelihood of depreciation over the long term, a short term car lease will ultimately cost you less than a long term lease provided you take care of the vehicle.

How can I save money on a leased car? ›

The most frugal way to lease is to avoid the temptation to upgrade, since the same payment already gets you a more expensive car. Instead, lease the same car you could afford to buy and save the difference. You also can lease used cars at some dealerships or by using a lease-trading site.

Is putting money down on a lease a good idea? ›

Getting a lower monthly payment: Making a sizable down payment will certainly reduce your monthly lease payments, but it probably won't save you a ton of money compared to the overall cost of ownership while you lease. That's because a low money factor means negligible interest charges.

Can I lease 3 cars at the same time? ›

Yes, so long as you qualify, you technically can have three car loans at the same time. However, because you have two loans already, it may be difficult to get approved for a third. Since your daughter isn't 18 and can't get a loan on her own, the best course of action is for you to act as a cosigner.

What are the problems with leasing a car? ›

The Pitfalls of Leasing a Car
  • Mileage Restrictions. When you lease a car, you are limited to the amount of miles you can drive every year. ...
  • Down payments. ...
  • Expensive Insurance. ...
  • Gap Insurance. ...
  • Extensive Fees. ...
  • Difficulty Getting Out of A Lease. ...
  • You Have to Pay For Repairs, But No Upgrades Allowed.

What's the pros and cons of leasing a car? ›

Pros and cons of leasing a car
Pros:Cons:
No or low down paymentExcess mileage penalties
Usually covered by warrantyFees for excessive wear and tear
Lower monthly paymentsEarly lease termination fees
No upfront sales tax feesGenerally higher insurance premiums
1 more row
28 Feb 2020

What is better leasing or financing a car? ›

The monthly payments on a lease are usually lower than monthly finance payments if you bought the same car. With a lease, you're paying to drive the car, not to buy it. That means you're paying for the car's expected depreciation — or loss of value — during the lease period, plus a rent charge, taxes, and fees.

What does Dave Ramsey say about leasing a vehicle? ›

It is the most expensive way to operate a vehicle. When you give the leased car back, you will have paid the car company more than the car has depreciated during that time.

Is leasing a car a waste of money? ›

While you don't build equity with lease payments, you still get access to a car for a monthly fee. That means leasing a car isn't a waste of money in the same way that renting a home isn't a waste of money. Just like renting a home instead of owning one, leasing a car usually has fewer costs than owning it.

Is leasing a car good for your credit? ›

If you're concerned about how this decision will factor into your credit report and scores, rest assured—their impact is the same. This means leasing a car can help you build your credit history just like a loan would. That said, if you have bad credit, you may have a difficult time getting approved to lease a vehicle.

When should you lease a car? ›

The best time to lease a car is soon after a new model has been released, as this is when a car's value after depreciation is highest. This means that you'll pay less in monthly payments for a vehicle over the course of a lease agreement.

What are 3 advantages of a lease? ›

This type of arrangement has several benefits that could make leasing a much better deal for you.
  • Lower monthly payments. ...
  • Less cash required at drive off. ...
  • Lower repair costs. ...
  • You don't have to worry about reselling it. ...
  • You can get a new car every few years hassle-free. ...
  • More vehicles to choose from.

Can you return a leased car early? ›

When you terminate your car lease ahead of the agreed upon date, you may face additional fees and penalties that may cost you more than keeping the car through the full lease term. If you only have a few months left on your lease, you may decide that it is better to wait until the term ends before returning your car.

Why is leasing better than financing? ›

With financing, you own the vehicle outright. Also, lease payments are 30- to 60% lower than loan payments for the exact vehicle and term. With leasing, you deal with fewer maintenance problems, as leases run for the same length of time as the manufacturer's warranty coverage.

What happens to the down payment on a leased car? ›

If you decide to make a down payment on a lease, you aren't going to get that money back at the end of the term. A down payment isn't required in a lease, but you can still make one if you're looking to lower your monthly payment.

Can you smoke in a leased car? ›

Answer provided by. There are usually no rules against smoking in a leased car, although it's a good idea to check your lease contract first. Some dealers will charge a cleaning and maintenance fee if you return a leased car with smoke residue inside.

Can I trade in a leased car? ›

Can You Trade in Your Lease? Yes, is the quick answer. However, don't consider trading it in unless the vehicle's current market value (book value) exceeds the remaining payments plus any early termination fees and penalties.

Is it better to lease for 24 or 36 months? ›

Conclusions. 24-month leases may offer additional flexibility, but most shoppers will find they cost a lot more money when it comes to monthly payments. If your priority is monthly affordability and getting more for your money, you'll probably find a 36-month contract to be a smarter choice.

What does Suze Orman say about leasing cars? ›

In Suze Orman's words, "you should never, ever ever ever, lease a car." If you lease, you'll sink your money into several years' worth of car payments and be empty-handed when the lease term is done.

Does leasing a car affect debt to income ratio? ›

Will a car lease impact your debt-to-income ratio? In short, yes, leasing a vehicle adds a debt obligation to your credit report, which increases your DTI ratio.

Videos

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4. How To Lease A Car In Your Business Name [STEP-BY-STEP]
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6. How The Order Process Works For Leasing your First Vehicle - The Complete Guide.
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