How Does a Car Lease Agreement Work?
Car leasing has become one of the most popular ways to drive a brand-new vehicle in the UK. But if you’ve never leased before, you might be wondering exactly how a car lease agreement works, what you pay for, and whether it’s the right option for you.
This guide explains everything in simple terms, from monthly payments and contract length to mileage limits and end-of-lease options.
What Is a Car Lease Agreement?
A car lease agreement is a fixed-term contract that allows you to drive a new car for an agreed monthly payment, without owning the vehicle outright.
Instead of buying the car, you pay for:
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The depreciation of the vehicle during the contract.
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The agreed mileage allowance.
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Any included services such as road tax or maintenance.
At the end of the lease, you simply return the car and choose your next vehicle.
This makes leasing a flexible and cost-effective alternative to buying.
How Monthly Lease Payments Are Calculated
Your monthly car leasing cost depends on several key factors:
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Vehicle price and depreciation.
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Contract length (usually 24–48 months).
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Annual mileage allowance.
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Initial payment (deposit or upfront rental).
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Included maintenance or servicing.
Because you’re only paying for the car’s depreciation rather than the full value, monthly payments are often lower than finance or hire purchase.
What Is Included in a Car Lease?
Most UK personal and business car lease deals include:
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Road tax for the full lease term.
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Manufacturer warranty.
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Optional maintenance packages.
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Fixed monthly payments.
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Free UK delivery (with many leasing providers).
This makes budgeting simple, with no unexpected ownership costs.
Mileage Limits and Fair Wear and Tear
Every lease agreement includes an annual mileage allowance, such as:
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5,000 miles per year.
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8,000 miles per year.
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10,000+ miles per year.
If you exceed this limit, you’ll pay a small per-mile excess charge.
When returning the vehicle, it’s inspected using fair wear and tear guidelines, meaning normal everyday use is acceptable.
What Happens at the End of a Car Lease?
When your car leasing contract ends, you typically:
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Return the vehicle with no further payments (subject to mileage and condition).
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Start a new lease on a brand-new car.
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Upgrade or change vehicle type to suit your needs.
Unlike some finance agreements, you don’t usually own the car, which keeps monthly costs lower and allows regular upgrades.
Is Car Leasing Right for You?
Car leasing is ideal if you:
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Want to drive a new car every few years.
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Prefer fixed monthly costs.
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Don’t want to worry about resale value.
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Need personal or business vehicle flexibility.
It may be less suitable if you:
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Drive very high annual mileage.
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Want to own the vehicle long-term.
Find Your Next Car Lease Deal
Understanding how a car lease agreement works makes it easier to decide if leasing suits your lifestyle or business needs.
At Premier Vehicle Leasing, you can compare a wide range of personal and business car leasing deals with:
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Low monthly payments.
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Flexible contract terms.
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Free UK delivery.
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Manufacturer warranty included.
Get in touch today to find the perfect car lease for you.