How does Leasing pricing work?
Leasing a car or van is a big thing and our goal is to empower you with honest in depth and reliable cost information to help you make an informed decision.
This Leasing cost & pricing guide is designed to help you to understand how the leasing providers arrive at the monthly payments – and what influences these payments.
Let’s take a closer look.
The Car Network offer several different kinds of leasing contracts. But regardless of which one suits your particular circumstances best it is the same things that influence how much your monthly payment is going to be. Detail like minimum and maximum mileage for example may vary from lender to lender but the basic principles are the same.
Related articles: Which kind of lease is best for me? (And add a link.)
The cost of the vehicle – governed by how much discount and bonus the leasing company has been able to negotiate with the manufacturer. If the vehicle is about to be replaced by a newer model for example, this may result in the manufacturer being keen to sell off existing stock cheaply and quickly. In this case the leasing provider may do a deal with the manufacturer and buy a batch of vehicles at a very good price.
The sale of the vehicle. The residual value, which is determined by age, mileage and condition, and how much the leasing company get for the car or van at the end of the contract impacts on the bit in the middle – the depreciation.
The length of the contract. – Most contracts run between 2 and 5 years. As the monthly payments are basically paying for the depreciation, the longer the length of time it is spread over – the lower your monthly payments will be, in most cases.
The annual mileage. Contracts can have annual mileage allowances from 5,000 to 50,000 miles per year, and it is obvious that the same car with say 10,000 miles on it at the end of the contract is going to be worth much more than one with say 90,000 – 100,000 miles on the clock. The value at the end – the residual value – plays an important part in determining the overall cost of the contract.
Service & maintenance. Most contracts allow you to choose to include all routine servicing, maintenance, repairs and tyres in your monthly payment. This is good for budgeting, and shouldn’t really cost you any more overall than paying as you go. Contractually the car has to be maintained in accordance with manufacturer’s schedules.
Roadside Assistance – the length of the Roadside Assistance that comes with the vehicle varies with manufacturers and so in some cases a top up may be added into the contract.
How much you pay up front. Just to be clear – the upfront payment is not a deposit – and it is NOT returned at the end of the contract. It is part of the overall costs – and you can choose how much of it is paid in advance. Since it makes little difference to the overall costs, how much you pay in advance is just a matter of convenience and what is best for your budget. The more you pay in advance the lower the monthly payment will be – and vice versa – it really is that simple.
So I hope that explains how the monthly leasing payment is influenced basically by how much the car or van costs in the beginning, less what it is worth at the end.
The end value will depend on mileage and condition. So between them that forms the cost between the 2 which is divided up into the number of monthly payments (i.e. length of contract.)
Add into the mix maintenance and roadside assistance and how much is paid in advance and you can begin to see how the figures can shift around.
You will sometimes see very low monthly rates advertised, when on closer examination it can be seen how the figures have been manipulated – and it may be that the contract is for 5 years, based on 5,000 miles a year, is non- maintained and has a large upfront payment. All these factors when worked together can make the monthly payment appear very attractive.