Car leasing explained

Car leasing, also known as Personal Contract Hire or PCH, allows you to lease a brand new car from 2 to 5 years. It can be a simple way to drive a brand new car, as you can spread the cost with monthly payments.

What is car leasing?

Car leasing or Personal Contract Hire (PCH) is like a long-term rental. It means you can pay an initial rental payment for the car you want, then pay fixed monthly payments over a set period of time. This usually ranges from 2 to 5 years, based on your contract. 

With PCH, you don’t own the vehicle. Instead, you’ll return your car to the leasing company when the contract comes to an end. 

How does leasing a car work?

Leasing a car works in a similar way to renting. You select a car, sign a leasing agreement and follow the conditions set out in that agreement. When the agreement term is up, you must return the vehicle. 

The cost of the monthly agreement can depend on a range of factors, including:

  • The current value of the car.
  • The depreciation of the car – this means the difference between its current value and the estimated value at the end of the contract.
  • The length of your lease.
  • Your initial monthly rental amount – often the higher the initial monthly rental, the lower your monthly payments can be.
  • Your estimated annual mileage – you’ll be asked how many miles per year you want to drive your lease car. The higher your annual mileage, the more expensive your monthly payments will be. If you go over your agreed mileage, excess mileage charges will apply. 

What happens at the end of a car lease?

At the end of your car lease, you hand back your keys and look for a new car to lease or buy. Providing you have followed the terms of your lease agreement, there will be no further charges.

To avoid any potential charges, you’ll need to make sure the car is in good condition and that you haven’t gone over the mileage you agreed to in your contract.

Is car leasing the right choice for me?

Before you decide to lease a car, you should weigh up whether car leasing suits your needs. Check out some of the benefits and things to consider:

Features of Car Leasing

  • You can spread the cost with monthly payments 
  • Leasing a brand new car will mean you are covered by a manufacturer warranty for up to 7 years with some car manufacturers, for peace of mind
  • You are able to get a maintenance package as part of your lease, for an added fee. This could save you time and money if you have to repair or replace any parts
  • There’s no need to stress about selling the car at the end of the contract as you’ll be returning it to the lease provider.

Things to consider

  • You don’t own the car at the end of the agreement – the payments only cover the cost of the hire
  • You must be able to afford the payments, or the contract could be terminated and you’d have to return the vehicle
  • Any excess mileage or damage will need to be paid for. The vehicle must be returned in good condition to avoid further charges
  • If you decide to end your lease early, you'll face termination charges.

How to lease a car

In this section, we’ll take you through each step to show you how to lease a car.

1. Find a lease deal

Ask yourself what budget you’re happy with and how much you want to pay upfront. You’ll also want to consider:

  • The style of car
  • Fuel type – petrol, diesel, electric or hybrid
  • Transmission type – automatic or manual
  • Mileage - how much you think you’ll use the car
  • If you want to include a maintenance and breakdown package.

2. Contact the lease provider

Get in touch with whoever is offering the deal you’re interested in.

3. Get a quote and apply

Read through all of the terms and conditions before applying to get a quote, ensuring all of your car and lease requirements are included. 

4. Pass financial checks

The lease provider may look to see if you have a history of debt, any missed payments and the number of credit accounts you have. They won’t usually check your general outgoings, so you’ll need to work out what you can afford to pay each month yourself.

At Bank of Scotland, as you already have a current account with us, we’ll only need to do a soft credit check when you get a quote. So this won’t impact your credit score. 

5. Finalise and sign your contract

As you near the end of the sign up process, you’ll need to agree on your final contract terms with the leasing provider. You can use this time to finalise:

  • Date of delivery
  • Contract length
  • Annual mileage limit
  • Initial payment and monthly payment split
  • Additional costs – such as insurance and maintenance.

Does car leasing include insurance?

Normally, car leasing agreements don’t include car insurance. But some providers may have an option for an insured lease, which does include insurance. If so, you would pay a rental sum that incorporates the car insurance, in addition to the lease of the car. At Bank of Scotland we don’t offer car insurance as part of the lease, but you can arrange car insurance with us separately. 

Frequently asked questions about car leasing

  • The amount it costs to lease a car can vary based on the type of car you want and how long the lease lasts.

  • While you can lease a used car with some providers, Bank of Scotland only provides car leasing for brand new cars. So, you should bear this in mind when deciding what car lease deal would be best for you.

  • It's usually fine to put a private number plate on a leased car. But bear in mind the leasing provider owns the vehicle, so you’ll need to get in touch with them first before arranging anything. There may be a charge for adding and removing a private plate.

  • It depends on the finance provider. Some may let you extend your car lease for an agreed period. There are two types of car lease extension available:

    • Informal extension – also known as an extended hire, or a rolling contract. In this case, you would continue to use the leased car beyond the end of the contract date, until collection is requested
    • Formal extension – a formal agreement between you and the lease provider, allowing you to extend the contract for an additional term, often six or 12 months. 
  • When you lease a car, the registered keeper is the company that funds the lease. This means they'll have to take care of elements such as road tax and any contact with the DVLA.

Looking to lease a car?

You can take your pick from thousands of brand new cars to lease, from more than 30 manufacturers with Bank of Scotland. Select a lease between two to five years, agree an annual mileage and get your PCH quote today.

Get a PCH quote

Leasing is exclusively provided by Lex Autolease Limited. Bank of Scotland plc act as a credit broker not the lender.

Other ways to finance a new car

PCH is just one option if you want to get a brand new car. But there are other types of car finance available. The main options are:

  • Personal Contract Purchase (PCP) – you pay an upfront deposit followed by regular monthly payments. The main difference between PCP and PCH is that you can pay a ‘balloon payment’ at the end of the term to buy the vehicle outright. Or, you may be able to refinance the remaining amount. If you don’t want to own the car, can you can return it in good condition at the end of your agreement.
  • Hire Purchase (HP) – spread the cost of a new car through monthly payments and it’s all yours at the end. Monthly payments tend to be higher as a result. But, on the plus side, there’s no final instalment to pay at the end and no mileage limits.
  • Personal loan – you could take out a personal loan to buy the car outright and own it from the start. Then, rather than paying off the car, you would pay off the cost of the loan to your bank or loan provider through monthly repayments.

More car finance options

If you’re not set on leasing a car, you can check out these other ways to buy a car.

Existing customers

Already bought or leased your car with Bank of Scotland? Keep track of your monthly payments online and find out how long is left on your lease.

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