Long-term car lease: should you choose one?

  • Better value than short-term leasing
  • Easy to understand
  • Alternatives are available

The number of cars being leased in the UK has jumped 12% when compared with the same time last year. Furthermore, Personal Contract Hire agreements, e.g. regular leasing deals normal customers use, is up 23%.

People are really switching on to the idea of leasing a car, rather than buying one outright. But what is leasing?

It's essentially a form of car hire. Pay an initial payment, then your fixed monthly payments, and that's it. You hand the car back at the end of the leasing agreement.

What is a long-term car lease?

There's no definition as to how long a long-term car lease needs to be. But generally, long-term leasing is anything more than 24 months. Whereas, short-term leasing is generally between one and six months.


Cheapest long-term car lease

2018 Fiat 500 front

Generally, the cheapest long-term car leases start from £100 to £150 per month.

There are two different perspectives when looking at cost: cost per month and overall cost.

The cheapest monthly figures are generally offered on the higher end of the longer-term leasing deals (around 48 months) with low mileage agreements (6,000-8,000 miles a year) and largish (£1,000 and more) initial payments.

On shorter term contracts, the monthly figures are inflated compared with long-term contracts. We've seen MINI Hatches for as low as £150 per month on a 48-month contract with an initial payment of £1,250.

The figures below show typical short-term and long-term leasing deals for a Fiat 500. While the three-month deal is very flexible, it works out to be a lot more expensive in the long run compared with a long-term leasing.

Typical three-month Fiat 500 deal

Monthly cost: £312 (3 payments, incl. VAT)
Initial payment: £0
Total amount payable by customer to lease car and return (excluding excess mileage charges and any end of contract charges): £936
Mileage allowance: 1,000 miles per month
Cost per year: £3,744

Typical 48-month Fiat 500 deal

Monthly cost: £100 (47 payments, incl. VAT)
Initial payment: £1,000 (plus £199 processing fee)
Total amount payable by customer to lease car and return (excluding excess mileage charges and any end of contract charges): £5,899
Mileage allowance: 8,000 miles per year
Cost per year: £1,474.75

Long-term car lease alternatives

Short- and mid-term leasing agreements

Other lengths of leasing deals are available. Shorter contracts, like 24 or 36 months, are usually a bit more expensive per month, but they offer customers the chance to change cars more often.

PCP (Personal Contract Purchase)

A PCP agreement allows customers to spread the cost of a car across a deposit, monthly payments, and an optional final payment. If you want to buy the car at the end of the agreement, you pay this additional amount. If not, you can trade it in for another model, or walk away.

>> What is PCP?

HP (Hire Purchase)

The entire cost of a car is spread across a deposit and monthly payments. Once you've paid all of this, you own the car with nothing left to pay.

>> What is Hire Purchase?

Car hire

This may seem like an extreme measure, but this is an option. Most hire companies allow you to rent for a few months, and some will even let you rent for a whole year. If you want to lease a car, but your usage would be sporadic, this is a serious option as you can do it on a month by month basis.

2019 Range Rover Evoque rear

Long-term car lease pros

>> Cost effective in the short-term
>> Regularly change into brand new cars
>> Simple to understand

Long-term car lease cons

>> Can be more expensive in the long-term in comparison with PCP 
>> Won't let you change cars as regularly compared with shorter-term leasing deals
>> Credit score can be affected if payments aren't kept up

Should you choose a long-term car lease?

As long as you're aware that it might not be as good value in the long run as a PCP deal or simply buying in cash, there's no reason you shouldn't go for a long-term lease. And it does work out as better value than short-term leasing too.

It's one of the easiest ways of driving a new car, and it still makes budgeting your monthly outgoings simple.


Further reading

>> How does car leasing work?
>> Short-term car leasing: is it worth it?

>> Lease or buy a car: rent or keep?
>> Best hybrid cars to lease
>> Best electric cars to lease
>> Best new car deals