Car lease deals explained

Every personal or business contract hire quote is built from the same handful of parts. If a quote leaves one out, ask for it in writing before you compare anything.

The monthly rental is the regular payment. It is the figure advertised most prominently and the one that tells you least on its own, because it depends on every other part of the quote.

The initial rental is the first payment, and it is larger than the others. It is usually expressed as a multiple of the monthly rental, such as 3, 6, 9 or 12 months. It is not a deposit in the everyday sense: it is rent paid in advance, so it counts toward the cost of the lease. A bigger initial rental lowers the monthly rental, but the money has gone either way, so the total over the term is what matters.

The term is the number of months you are committed for. Common terms run from 24 to 48 months. A longer term spreads the cost thinly, so the monthly rental looks lower, but you are tied in for longer and the car is older when it goes back.

The mileage allowance is the number of miles per year included in the rental. It is chosen at the start and is hard to change cheaply later. Any miles over the allowance are charged at a pence per mile rate when the car is returned. Miles you pay for and do not use are not normally refunded.

Fees sit on top of the rentals. These include an admin or arrangement fee, and sometimes a delivery charge and a documentation fee. Each one is small next to the rentals, but they differ between quotes and add up.

Maintenance is an optional add-on in many quotes. It spreads the cost of servicing, and sometimes tyres and brakes, into a monthly amount. Whether it saves you money depends on what it covers and how you use the car. Road tax is normally included in a standard lease; insurance and fuel are not.

It surprises many people that two providers can quote very different rentals for an identical car, term and mileage. There is no single cause. These are the main factors, in no particular order.

Residual value is the first. A funder owns the car and expects to sell it at the end of the lease. The lower the amount the funder expects to lose between the starting price and the resale price, the lower the rental it can charge. Funders each make their own forecast, and a forecast that is a little more optimistic can mean a noticeably lower monthly rental. Residual values are also revised over time, so a quote can change between weeks.

The purchase price the provider pays is the second. Large brokers and dealer groups buy cars in volume and may get a better price than a smaller business. How much of that they pass on varies.

Broker margin is the third. A broker earns money from a lease, often through a fee or commission built into the rental. Margins differ, and they are not usually shown separately. This is a reason to get more than one quote, not a reason to avoid brokers.

Stock matters too. A car that is already built, or already registered and sitting in stock, can be offered on different terms from one that has to be ordered. A provider may want to move a particular colour or specification and price it accordingly.

Finally, manufacturers sometimes support particular models or terms, which can lower the rental on those cars. That support changes with the manufacturer's plans and is not the same across every model or provider.

None of this means a higher quote is a worse one, or a lower quote a better one. Different quotes can have different mileage, fees, term and inclusions, which is why the comparison method below matters more than the monthly figure.

There are general patterns in the lease market. They are tendencies, not rules, and we are not claiming any particular saving from them.

New registration plates change in March and September, and these are busy periods for new car supply. Providers sometimes adjust their pricing around them, and there can be more pre-registered or ex-stock cars around soon after.

Quarter ends and year ends can matter, because dealers and manufacturers have sales targets. Some providers tidy up their stock position around those dates.

A model run-out, where a car is about to be replaced by a new version, can leave stock that a provider wants to clear. A new model launch can do the opposite: demand is high and discounts are rare.

The practical lesson is to ask for dated quotes and note how long each is valid for. A quote that expires in a few days should be compared with another quote of the same age, not one from last month.

Excess mileage is the most common surprise. The charge per mile is usually shown in pence, and it can look trivial until it is multiplied by thousands of miles. If you are close to your allowance, check the rate before you sign, and consider whether a higher allowance at the start is cheaper than excess miles at the end. Our excess mileage calculator shows the maths.

Fair wear and tear decides what you are charged for when the car goes back. The BVRLA publishes a standard for what is acceptable on a returned vehicle, and many providers follow it. Ask which standard applies and read it. Small marks and wheel scuffs are the usual disputes.

Early termination is expensive because you are committed to the full term. If your circumstances change, ending a lease early usually means paying a large share of the remaining rentals, plus charges. Ask how a settlement figure is calculated before you sign, not when you need it.

Admin and delivery fees differ between providers and are sometimes shown late in the process. Ask for the total of every payment you will make, in writing.

Condition and insurance matter at the end. You are responsible for the car while you have it, and you must insure it. Check what the agreement says about servicing, repairs and who is responsible for them if maintenance is not included.

Regulation is worth a quick check. Consumer car leases are regulated, and a broker needs permission to arrange them. You can look up a firm on the Financial Services Register on the FCA website.