A plain-English guide to car leasing in the UK How it works, what it costs, and what to watch for. This is general information, not advice, and we don't arrange leases.
By Adrian, Car Lease Deals UK · Updated 18 October 2026
Car leasing, most commonly Personal Contract Hire (PCH) for individuals or Business Contract Hire (BCH) for companies, is a long-term rental. You pay a fixed monthly amount to use a brand-new or nearly-new car for an agreed period, then hand it back. You never own the vehicle, so you're paying for the use of the car, not the car itself.
Because you only cover the car's depreciation (plus the provider's charges) rather than its full price, monthly payments can be lower than financing a purchase. The trade-offs are mileage limits, wear-and-tear rules, and no asset at the end.
You pick the make and model you want, then decide on the contract length (often 24-48 months) and your annual mileage. These choices are the main drivers of the monthly cost.
Most leases start with an 'initial rental' (sometimes described as a deposit), usually expressed as a multiple of the monthly payment, e.g. 3, 6 or 9 months up front. A larger initial rental lowers the monthly figure.
For the rest of the agreement you pay the same amount each month to use the car. What's included varies: some products bundle maintenance or insurance, many do not.
Work out the all-in monthly costYour contract sets an annual mileage limit. Go over it and you typically pay an excess-mileage charge per mile at the end, so it pays to estimate your real mileage honestly.
Estimate an excess mileage chargeAt the end of the term you return the car. It's inspected against 'fair wear and tear' guidelines, and you may be charged for damage beyond that. Then you're free to start again with a new car.
Use the fair wear and tear checklistThe car's value & depreciation
How much value the car is expected to lose over the term is the biggest single factor.
Contract length
Longer contracts often spread cost more thinly per month, but tie you in for longer.
Initial rental
Paying more up front reduces the monthly amount, and vice versa.
Annual mileage
Higher mileage means more wear and lower resale value, so a higher monthly cost.
Maintenance package
Adding servicing and tyres to the agreement raises the monthly figure but smooths costs.
Leasing vs PCP, excess mileage and more
How flexible, shorter contracts compare
Specs and typical costs by model
Put your own figures into the costs described above.