This updated guide explains the key considerations for UK vehicle leasing: treat it as a fixed-term contract, confirm whether you're taking a PCH (lease) or PCP (purchase-option) product, check what the monthly price includes (VAT, fees, maintenance), negotiate realistic mileage allowances and understand excess-mileage charges, budget for insurance and possible return recharges, and compare leasing to other finance options. Take photos at handover and keep maintenance records to limit end-of-contract charges.

Don't sign a lease on impulse

Dealerships often advertise low monthly payments to get you into the showroom. A tidy monthly figure can look affordable, but a lease is a multi-year contractual commitment. Read the contract, ask questions and resist pressure to buy on the spot.

Understand what you are committing to

Leases typically run for a fixed term and include penalties for early termination. You won't build equity like you would when buying. Think about likely life changes (family, job, commute) over the full term before you commit.

Know the product: PCH vs PCP

Personal Contract Hire (PCH) is a lease: you hire the car for a term and return it at the end. Personal Contract Purchase (PCP) is different - it usually gives you an option to buy the car at the end. Make sure you know which product you are being sold.

Total cost, not just the monthly price

Ask whether the monthly figure includes VAT, maintenance, delivery, or administration fees. Check for an initial payment or deposit. Add insurance, road tax, fuel, servicing, tyre replacement and any optional maintenance packages when comparing deals.

If the lease is for business use, VAT treatment can differ from a consumer lease - check how VAT is handled and whether any VAT is reclaimable for your circumstances.

Mileage: negotiate what you need

Most lease offers are based on a mileage allowance. If you exceed that allowance you will pay an excess-mileage charge when the contract ends. Work out your realistic annual mileage (use recent MOT/trip logs or phone data) and negotiate the allowance up front. Ask for the excess-mileage rate per mile so you can model worst-case costs. 1

Insurance and running costs

A low monthly lease payment can tempt you into choosing a sportier car with higher insurance premiums. Get insurance quotes for the exact model and spec before you sign.

Condition, wear and return charges

Leases set standards for "fair wear and tear". You will be charged for damage beyond that standard - dents, scuffs and mechanical neglect can attract recharges. Keep records of service history, take dated photos at handover and budget for minor repairs while you have the car.

A modest monthly repair fund can reduce the chance of a large final bill; decide an amount that suits the vehicle value and your circumstances. 2

Compare alternatives

Compare leasing to buying, PCP and hire-purchase across the same timeframe. Factor in the likely resale value, interest or finance charges, and your need for flexibility.

Practical checklist before signing

  • Confirm term length and early-termination penalties. 3
  • Confirm what is included (VAT, maintenance, delivery, administration fees).
  • Negotiate realistic mileage and get the excess-mileage charge in writing.
  • Get insurance quotes for the specific car and trim.
  • Record the car's condition at handover and keep receipts for repairs and maintenance.
If you do your homework, leasing can suit people who like regular vehicle updates and predictable monthly payments. But it must match your budget, mileage and life plans.
  1. Confirm current UK VAT treatment and rates for consumer leases and business leases (including reclaim rules).
  2. Verify typical or average annual mileage figures used by UK motor trade and recent national averages.
  3. Confirm common lease term lengths (e.g., prevalence of 36-month contracts) in the current market.
  4. Obtain typical excess-mileage charge ranges (pence per mile) for different vehicle segments.
  5. Confirm typical early-termination charge structures and common consumer protections in UK leases.

FAQs about Commercial Vehicle Leasing

What is the main difference between PCH and PCP?
PCH (Personal Contract Hire) is a lease: you hire the car for a fixed term and return it at the end. PCP (Personal Contract Purchase) typically includes a final balloon payment option that lets you buy the car at the end. Make sure the dealer confirms which product you are being offered.
Can I end a lease early?
You can, but most leases include early-termination fees or require you to settle outstanding payments. Ask for the exact terms and costs before signing and consider insurance or GAP cover options.
How do excess mileage charges work?
Your contract sets an annual mileage allowance and a per-mile charge for any excess. Negotiate the allowance up front and get the excess-mileage rate in writing so you can calculate potential end-of-contract costs.
Do I need comprehensive insurance on a leased car?
Yes. Lease providers generally require comprehensive cover and may have named-driver or mileage restrictions. Get quotes for the specific model and specification before signing.
What is 'fair wear and tear'?
Contracts define acceptable levels of wear (minor scuffs, light interior marks). Damage beyond that - large dents, significant scratches, or mechanical neglect - can lead to recharge bills. Keep maintenance records and photos to dispute unfair claims.

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