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Direct365 Car Leasing & Contract Hire Guide

What car leasing is

It’s a little more complicated than this, but in its simplest form, leasing is effectively paying for the use of a car over a fixed period of time as opposed to actually buying the vehicle. It is also known as “Contract hire”.

Whereas if you bought a car outright, or took out an alternative finance agreement the car would be yours to own, with a lease you never actually own it, but the plus side is that your monthly payments are much less.

What you are actually paying for is the depreciation of the cost of the vehicle along with a commission fee – hence the saying “If it appreciates, buy it. If it depreciates lease it.”

What you need to know before you start

In terms of evaluating a lease there are a few factors that you need to consider:

What car have you got your eye on?

The more expensive the car is, the more you can expect to pay for the lease of the vehicle over the duration of your contract.

The initial deposit which you put down

In most circumstances your initial deposit would be 3 times the monthly payment. For example: if your monthly fee was £200, your deposit would be 3 times that - £600. (See, we’re not just a pretty face) You can also choose to pay more for your deposit if you'd prefer in order to reduce your monthly payments.

Something that we like to brag about here is that we let you part-exchange your current vehicle towards the deposit – not a lot of others do, so bear that in mind.

How long do you want to lease the vehicle for?

In most cases, the longer the contract of your lease, the less you pay each month. But the downside is that you are tied down into the contract for a longer period of time – our leasing experts can have a chat with you to work out which length suits your individual needs most adequately if you are unsure.

What is your annual mileage?

The more miles you put on the clock, the less the car is worth. When your contract ends and you give the car back to us, we will probably sell it on, which makes the mileage especially important to us – you need to make sure that you stay under your estimated total or you will incur a PPM (Or Pence per Mile) charge.

Don’t worry too much about this though; you can get in touch whenever you like to re-negotiate your annual mileage limit to make sure that you stay well clear of any additional costs.

Would you like maintenance with that?

You don’t need to take this out, but we do offer maintenance included with all of our contracts. It just means that in the case of something going wrong, you can just give us a call on your dedicated number and we will get the problem sorted on your behalf.


Is leasing right for me?

As with everything, there are positives and negatives of a lease agreement – here is a quick summary of both to help you work out if it is right for you

Here are some of the benefits:

  • If you’re a business – you can claim “Capital allowances” which effectively means it can be written against profits to save some of that tax money (It is very dependent on how much personal vs business use the car will have, though – be sure to check this with us before you take out an agreement)
  • It helps to remove assets from your balance sheet and eliminates the financial risk of disposing of the vehicle
  • It’s cheaper compared to other finance options, therefore you can drive a much better car for your money
  • You can often use the car purely within the manufacturer’s warranty period which will typically need less maintenance than an older vehicle and potentially save you money on repairs.
  • You get the added peace of mind and safety that a new car provides
  • With lease periods only usually lasting a few years, you can change your car more often, if that's your kind of thing
  • You get cost certainty – you can calculate pretty much exactly how much you will be paying and for how long

What are the drawbacks?

  • You never actually get to own the car
  • When you finish paying for another type of finance agreement, you can sell the car, or keep it with no more monthly payments.
  • Leasing requires a good credit rating to get the best prices, or to get a lease at all in some cases
  • You need to stick within a yearly mileage limit (Which, in fairness, you can re-negotiate at any time)
  • You need to return it in excellent condition, so if you’re extremely hard on your vehicles, it might not be the best option for you.
  • You need to be sure of your financial future, terminating contracts early can be extremely expensive (Usually half the cost of the remaining monthly payments). So you need to be certain that you are good to tie yourself down for the contract length before you start.