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What is Car Leasing?

WHAT IS CAR LEASING? The short answer: leasing is a hire agreement where the buyer makes a fixed monthly payment for the rental of a vehicle for a predetermined amount of time. The monthly payment is determined by the car’s initial value and its predicted residual value, i.e. what its value will be at the end of the lease. The rest of this page is the long answer: we’ve attempted to answer every question we could think of about the leasing process.

If you need to consult our leasing glossary, you can find it by clicking here

The areas covered in this guide:

INTRODUCTION TO LEASING

ARE THERE DIFFERENT TYPES OF CAR LEASING?

Yes.

Personal contract hire is a convenient and hassle-free hire agreement, whereby the user simply pays a fixed monthly rental for the use of the vehicle over a pre-determined term and mileage. There’s no risk of unpredictable residual values as at the end of the agreement, the vehicle is returned to the funder for disposal. It’s popular with business users as it’s both VAT and tax efficient and with private individuals who want fixed cost motoring.

Personal contract purchase is a purchase agreement with a difference in that it offers low fixed monthly payments with the bonus that the user has no risk of a potential fall in the residual value of the vehicle. This is due to a balloon placed at the end of the agreement, which is guaranteed by the finance house and is determined at the start of the contract based on the term and mileage that you choose. At the end of the agreement, you can either pay the final amount and keep the vehicle or sell it/trade it in and use the equity towards your next vehicle or simply hand it back to the finance company. It’s popular with companies who aren’t VAT registered and private individuals who want fixed cost motoring with flexibility.

Finance lease agreement is a VAT beneficial hire agreement for business users who want to handle the admin of their vehicles and have the asset shown on their balance sheet. The hirer can choose to pay the entire cost of the vehicle plus an interest cost over the lease period and receive a percentage of the proceeds following the sale of the vehicle or pay lower monthly rentals with a final balloon payment based on the anticipated resale value of the vehicle.

Hire purchase is a purchase agreement for a business or an individual who wants eventual ownership of the vehicle which is acquired when all the payments, including the option to purchase, have been made. Part of the capital cost of the vehicle payment may be deferred into a “balloon” payment at the end of the agreement, the anticipated value of the vehicle. At Vantage Leasing we offer Personal Contract Hire.

IS LEASING MORE COMPLICATED THAN BUYING?

No. It is just less familiar to people who have not leased before. In the next section we will break down the leasing process to help you understand how it works.

ARE THERE DIFFERENT LEASING RULES FOR VEHICLES OF DIFFERENT SIZES?

Yes. This guide is for cars and vans as offered by Vantage Leasing.
Commercial vehicles and fleet leasing are subject to slightly different terms.

CAN YOU HELP ME CHOOSE THE RIGHT VEHICLE FOR MY NEEDS?

Absolutely: get in touch with us via phone, email, or live chat! We’ll be happy to help you make a decision or understand any aspect of the leasing process.

HOW DOES LEASING WORK?

The Contract Hire company calculates the residual value for the vehicle based on the age, length of hire and the mileage it will be covering. They charge the user a monthly rental to cover depreciation over that period plus a funding charge, along with any add-on services required such as maintenance. The user has no risk in ownership and has a predictable monthly cost. The user effectively pays just for the use of the vehicle

HOW IS THE LEASING PROCESS STRUCTURED?

It can be summarised as follows:

  • You choose a vehicle you like the look of and get in touch
  • The leasing company will use the residual value for the vehicle that has been calculated by an external finance company. This will be based on its age, the desired length of hire and the mileage it will be covering.
  • The leasing company combine this value with several other factors, then divide this amount by the duration of the lease in months to calculate monthly payments
  • You and the leasing company discuss other desired terms of the lease, such as mileage limits, extra packages (such as maintenance), and any special requests for the vehicle’s design (where applicable).
  • You agree to these terms and sign a contract to that effect
  • A direct debit is set up that will take monthly payments for the duration of the contract
  • You receive a copy of the rental agreement
  • You will be informed about fuel and the battery charge policy
  • You receive the vehicle and retain control of it through the lease process
  • The end of the lease process is outlined [later on in this document]
WHAT DO I HAVE TO DO?

Browse our website for a car that takes your fancy, then give us a call. We’ll guide you through the process from there.

HOW LONG DOES A VEHICLE LEASE LAST?

We offer 24, 36, 48 or 60 month leases (i.e. 2-5 years)

WHAT HAPPENS TO THE CAR AT THE END OF THE LEASE PERIOD?

If you opted for a personal lease agreement the car will be returned to the funder.

If you chose a PCP or Hire Purchase agreement you will have the option to buy the vehicle.

IS THERE ANY RISK ASSOCIATED WITH LEASING?

The funder assumes the risk of the residual value of the vehicle.

HOW OLD DO YOU HAVE TO BE TO LEASE?

There is no minimum age requirement to lease a vehicle, however as a customer you must hold a full UK driving license.

If you are young and do not yet have a credit history you may be required to have a guarantor sign your form as well: someone who lives at your address and has a good credit history.

WHICH TYPE OF VEHICLES CAN BE LEASED?

At Vantage we lease convertibles, coupes, estates, hatchbacks, SUVs, MPVs (Multi-purpose vehicle) and saloons from over 25 car manufacturers.

Vantage Leasing specialise in the leasing of prestige cars, and especially Range Rover Evoque lease.

CAN SOMEONE WHO ISN’T NAMED ON THE LEASE DRIVE THE CAR?

Yes, other drivers can use the vehicle if they have relevant insurance.
Note: the vehicle cannot be used as a taxi, or as a hire vehicle, or for chauffeuring purposes.

CAN THE LEASE BE TRANSFERRED TO SOMEONE ELSE BEFORE THE CONTRACT ENDS?

This would be subject to the terms in your contract as these can vary funder to funder. A transfer of hire is possible on non-regulated agreements to another credit-worthy company.

WHY ARE THEIR MILEAGE LIMITATIONS?

Funders don’t allow lease companies to return the car above a certain mileage.

Limiting the miles the car will drive is a good way for controlling for its value at the end of the lease. It is a technique used to ensure neither side of the leasing agreement loses out if the car is overused or underused.

IS ROAD TAX INCLUDED WITH A LEASE?

Yes the road tax of the vehicle would be covered for the duration of the lease.

DOES MY LEASE VEHICLE NEED AN MOT?

Vehicles in the UK only need an MOT after three years, so any lease term of three years or shorter won’t need one.

IS THERE A REGULATORY BODY FOR VEHICLE LEASING?

Yes, the BVRLA. It stands for British Vehicle Rental and Leasing Association.

ARE VANTAGE LEASING A MEMBER OF ANY SUCH ORGANISATIONS?

Yes. We are a member of the BVRLA, Registered Number: 1962

WHAT DOES MEMBERSHIP ENTAIL?

Adherence to the following principles:

  1. To provide clear pricing for all products and services sold via any sales channel, printed or digital, which promotes a member’s products.
  2. Not to misrepresent any information about their products or services.
  3. To behave at all times with integrity and ensure that any agents working on their behalf also follow the standards set out in this Code of Conduct.
  4. To understand and comply with all rules and regulations relating to the service or product provided.
  5. To provide customers with the advice they need to make an informed choice.
  6. To operate from an established place of business that is maintained to a professional standard.
  7. Not to use any advertising material containing misleading or inaccurate statements.
  8. To comply with the codes and standards set by the regulators.
  9. To display the BVRLA logo at their premises, on their company stationery and in their sales channels.
  10. To provide safe and roadworthy vehicles and equipment, which, as a minimum, will be maintained in accordance with the law and manufacturers’ servicing guidance.
  11. To ensure that employees are adequately trained to a standard at least as high as that provided by the BVRLA’s accredited training programmes.
  12. To resolve customer complaints according to the standards set out in [the] Code of Conduct

The code of conduct can be found here.

Leasing vehicles are kept at the standard of the BVRLA’s Quality Assurance programme to ensure their safety.

Members are subject to unannounced inspections of vehicles and records to ensure compliance.

ARE THERE OTHER CHECKS IN PLACE TO MAKE SURE LEASE VEHICLES ARE SAFE?

Yes: manufacturer’s’ maintenance and servicing recommendations are followed.

Vehicles are inspected every fortnight or 1000 miles, whichever comes first

WHAT IS THE DIFFERENCE BETWEEN LEASING AND BUYING?

Leasing a car is to buying a car what renting a property is to buying one.
It differs to car hire in that you have the car for a longer term, usually one to three years. It differs from outright ownership in that you return the car at the end of the lease period.
In order to be mutually beneficial for the leasing company and lessee, some limitations are placed on the vehicle. These ensure that the vehicle is returned in a suitable condition for re-sale.
Some of the questions we get asked about what you can do with a lease vehicle are answered below.

CAN A LEASE VEHICLE BE TAKEN ABROAD?

Legally, yes. You need you will need a Vehicle on Hire certificate. This shows that the driver has permission to drive the vehicle, and includes their name and address.

Vehicle on Hire certificates, or VE103s as they’re known, can be acquired from the RAC at this link. This will cost £8 and is valid for one year.

The terms of taking a vehicle abroad can vary from funder to funder but generally, you are able to take a vehicle abroad with prior consent and you must ensure that you have legal insurance to drive the vehicle abroad.

AM I ALLOWED TO USE MY LEASE VEHICLE FOR TOWING?

Yes. Information on each vehicle’s specific towing weights can be found in their vehicle handbook.

CAN I PUT A CUSTOM NUMBER PLATE ON A LEASED VEHICLE?

Yes: the vehicle can be registered with your custom plates or we can switch the plates at a later date.

WHO OWNS THE LEASE VEHICLE?

There is a document called the V5 that shows the legal owner, and the finance company will be the legal owner of the car throughout the lease.

On their internal systems they will note either Vantage Leasing or you as the vehicle’s keeper.

HOW MUCH DOES IT COST TO LEASE A CAR?

The leasing company charge the user a monthly rental to cover depreciation over that period plus a funding charge, along with any add-on services required.

WHAT AM I PAYING FOR WHEN I LEASE?

You are effectively paying for the value of the vehicle for the year(s) you lease it.

The difference between the vehicle’s original value and its estimated value at the end of the lease (residual value) is divided by the length of the lease (in months) to arrive at a monthly payment.

Cars that are more expensive to buy will also be more expensive to lease.

Cars that have a higher residual value will be cheaper to lease – this is because the difference in original value and residual value is smaller.

HOW IS THE RESIDUAL VALUE CALCULATED?

Companies such as Automotive Lease Guide (ALG) track vehicle depreciation and provide residual value estimates for a large range of models. These figures are arrived at by seeing what a reconditioned and clean former-lease vehicle would sell for at an auction.

Residual values used in leasing contracts are based on the figures provided by these companies, but adjusted slightly by individual finance companies according to their risk preferences.

Because these figures are arrived at by a combination of external bodies, they are not a negotiable part of a leasing contract.

HOW IS MY MONTHLY PAYMENT CALCULATED?

The difference between the original value and the residual value is calculated.

The resulting amount is divided by the amount of months in your lease.

Interest is added to this amount.

HOW DO I PAY?

The first payment will usually be taken 14 working days from when the contract is made live. This is usually after the vehicle has been delivered and all our paperwork is submitted to the funder. We may ask for a non-refundable deposit to secure a vehicle.

Payments are taken monthly by direct debit.

WHAT ARE THE TAX IMPLICATIONS OF LEASING?

If the vehicle is used just for businesses, VAT registered businesses can recover 100% of the VAT on monthly payments. This drops to 50% if the vehicle is used for leisure as well.

WHAT ARE THE BENEFIT IN KIND IMPLICATIONS OF LEASING?

If you are given a company car that is leased, and you use the car for personal reasons too (i.e. you take it home at the end of your work day), it will have a Benefit in Kind (BiK) value attached to it.

HANG ON - WHAT DOES BENEFIT IN KIND MEAN?

Benefit in Kind is a means of taxing non-financial rewards for employment, such as company cars. A full definition can be found in the leasing glossary below

WHICH MODELS HAVE THE MOST APPEALING BIK STATUSES?

A car’s BiK percentage is based on its emissions, so cars with lower emissions will have a more attractive status.

IS IT POSSIBLE TO TRADE IN MY CURRENT CAR TO REDUCE THE COST OF A LEASE?

We are able to look into the trade in value of your vehicle, although this would be treated as a completely separate transaction to your lease.

CAN YOU PROVIDE AN EXAMPLE LEASE BREAKDOWN?

The lease will normally consist of an initial payment which is based on either 3, 6, 9 or 12 of the monthly rentals followed by a set monthly rental for the remainder of your term. Using the Range Rover Evoque TD4 SE Tech Auto covering 5,000 miles per year over 36 months with an initial payment of 6 rentals will give you:

Monthly Rental = £354.00
Initial payment = £2124.00
Therefore your payment structure would consist of a one off payment of £2124.00 followed by 35 months of £354.00 monthly rentals.

SHOULD I LEASE OR BUY?

There are pros and cons of each, and we’ve outlined them below.

WHEN DOES IT MAKE SENSE TO LEASE A CAR RATHER THAN BUY?

If you want to drive a car that’s flasher than one you can afford to buy outright, leasing can be a good way to make this more cost effective as you will only be paying to have it for a certain amount of time.

If you don’t want the hassle of selling a car once you’ve finished with it, and like the idea of being able to drive a new car every few years. This has the combined benefit of guaranteeing that your car is always in warranty.
If you are happy to agree to mileage limitations on the lease and do not feel this restricts your intended driving

WHAT ARE THE BENEFITS OF LEASING?

Low initial outlay

  • The costs are predictable and risk-free
  • The user has no risk of depreciation and disposal
  • The vehicle is off balance sheet
  • The rentals can be offset against the taxable profit
  • The administration and management burden can be transferred to a third party
  • Maintenance of the vehicle can be included as an option
  • If the vehicle is used solely for business (i.e. pool car, commercial vehicle, daily rental) the user can reclaim 100% of the VAT on the rental. If it used for both business and pleasure, the user can reclaim 50% of the VAT on the finance element of the rental and 100% of the VAT on the maintenance element if included
  • The contract generally includes road fund licence at the current rate for the complete term of the agreement
SHOULD I LEASE A CAR OR GET A LOAN TO BUY A VEHICLE OUTRIGHT?

Ultimately this is your decision.

Leasing removes some of the stresses you have to consider when buying: you don’t have to worry about some maintenance or repair costs, you don’t need to think about paying road fund license as it’s included automatically in the lease.

SETTING UP YOUR LEASE

We will guide you through the leasing process as quickly as possible, and then you will then be able to collect your vehicle (or request delivery) and begin driving.

CHOOSING YOUR VEHICLE

HOW DO I CHOOSE THE CAR I WANT?

This part is entirely up to you – head to our leasing deals pages and look through our selection!

We can answer questions and advise which car(s) will be suitable for your lifestyle and budget.

Alternatively, you can search by make, series or lease type on our website.

CAN I CUSTOMISE THE CAR?

This depends. If you go for a stock vehicle you will have some choice of colours. If you go for a factory order you will have much more flexibility in customising the vehicle, although this may change the price of the lease.

ESTABLISHING THE LEASING CONTRACT

HOW WILL THE TERMS OF THE LEASE BE ARRIVED AT?

We will sit down with you to decide the length of the lease and various other things.

HOW DO MILEAGE LIMITS WORK?

A maximum mileage for the lease contract will be agreed at the outset with a pre-agreed flat rate fee per mile after that.

There is no rebate if you drive less than the agreed mileage.

WHICH ACTIONS WILL BE TAKEN AT THE START OF THE LEASE?

We will take note of levels of fuel and other liquids.

A pre-rental inspection will be carried out according to criteria outlined by the BVRLA. This will record any pre-existing damage such as scratches and dents, both inside and outside the vehicle.

You have the opportunity to read the inspection report and sign in agreement or contest any issues.

WHAT DOCUMENTS WILL I RECEIVE?

You will receive:

  • A rental agreement and the terms and conditions.
  • A copy of all contracts you have entered into.
  • A copy of the vehicle’s handbook (or relevant extracts).
HOW DO YOU LOOK AFTER MY DATA?

We are registered with the Information Commissioner’s Office (our number is Z2462681) and are compliant with data protection laws.

We keep vehicle inspection records for at least 15 months and these are available on request

GETTING YOUR VEHICLE READY FOR THE ROAD

DO I NEED INSURANCE ON MY LEASE VEHICLE?

Yes, and it needs to be fully comprehensive, otherwise you’d be obliged to pay repairs on the lease vehicle directly.

We cannot include insurance in the price of the lease because every lessee’s circumstances are different.

HOW DO I GET THE VEHICLE?

We can deliver the car anywhere in mainland UK or you can come and collect it from the showroom. If you choose the latter option we will be able to show you around the car and give you a full handover.

WHAT SHOULD I DO WHEN I RECEIVE THE CAR?

Check for any damage and note down the amount of miles the car has driven – ensure this matches the description on the pre-rental inspection report. If there are discrepancies let us know immediately.

DURING THE LEASE

WHAT HAPPENS IF THE CAR IS DAMAGED OR IN AN ACCIDENT DURING THE LEASE?

If condition of car varies from the initial inspection report you may be liable to pay for the damage. This can include anything from small dents and scratches through to mechanical issues.

Nobody expects an end of lease vehicle to go back in showroom condition. To protect you there is an industry standard fair wear and tear policy which is set by the BVRLA; if you would like a copy of this policy please get in touch.

WHAT IS A MAINTENANCE PACKAGE?


Once you have decided on which vehicle/term you are looking for we will usually offer you the option to either maintain the vehicle yourself or use one of our comprehensive maintenance packages to cover all of your maintenance needs.

WHAT IS INCLUDED IN A MAINTENANCE PACKAGE?

This varies between leases and budgets – we will discuss it with you during setting up your lease.

WHAT HAPPENS IF I WANT TO CHANGE VEHICLES BEFORE THE LEASE HAS FINISHED

Normally you are committed to the vehicle until the end of the contract (as with most finance agreements), however, should something serious go wrong for you from a health or affordability perspective we will do whatever we can to minimalize costs.

AT THE END OF THE LEASE

WHAT HAPPENS AT THE END OF THE LEASE?
  • A standard for the vehicle at the end of the lease will be stated to let you know what is expected
  • Mileage is checked and you will be invoiced at the agreed rate for distance above the agreed mileage limit.
  • Fuel is checked and you will be invoiced at the agreed rate if it needs to be topped up to the agreed value.
  • The car will be inspected again while you are present. Damage that wasn’t recorded on the inspection at the start of the lease will be noted and signed for on an individual basis.
  • If you can’t be present you will receive a report in writing with information on why each charge was raised and how much it will cost
  • (Note: if an inspection is not possible for whatever reason, this will be agreed by both parties with the understanding that damage found will be charged to the customer)
  • If you have the car collected we recommend you take photos of it in case damage arises while it is in transit.
IS THERE A WAY I CAN KEEP THE CAR AT THE END OF THE LEASE?

For personal lease agreements this unfortunately is not an option to purchase the vehicle at the end of the contract, however, we would be able to arrange a PCP or Hire Purchase agreement for you if you need that option.

With a business lease you do have the option to purchase the vehicle at the end; you would usually be given the final price at your request toward the end of the contract. Alternatively we can arrange a straightforward purchase agreement for you.

WHAT HAPPENS IF THERE IS A DISPUTE AT THE END?

You can pay for an independent qualified engineer to examine the car and/or verify the report. This must be agreed by both parties in advance. Once agreed upon, the engineer’s decision is binding. If they decide in your favour, the lease company will refund you.

Unresolved complaints can be referred to the BVRLA, the independent leasing organisation:

Chief Executive, British Vehicle Rental and Leasing Association, River Lodge, Badminton Court, Amersham, HP7 0DD complaint@bvrla.co.uk

There is an informal conciliation service which can be escalated to a formal one if the findings are not satisfactory.

Disclaimer: Different terms, mileages and contracts are available upon request. All contracts are subject to status and availability, guarantees may be required. We can introduce you to a limited number of lenders to assist with your lease and may receive a payment or other benefit from the finance provider if you decide to enter into an agreement with them. The images used on this website are for illustration purposes only. (c) Vantage Leasing Solutions Ltd. All Rights Reserved
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