For some motorists, leasing a car makes a lot of sense.

While no equity is built up in the vehicle, the customer may enjoy lower monthly payments compared to a loan, and be able to access a brand new car every couple of years.

But how much does it cost to lease a car?

Leasing a car can cost anything from £100 to £1,000 per month. 

Naturally, the car leasing cost of a Vauxhall Corsa will be much cheaper to lease than an upmarket BMW.


How are monthly lease payments calculated?

The overall monthly cost of leasing a car, depends on a number of factors:


Brand/model of car chosen

As mentioned, which car you choose will have an impact on what you pay - indeed, it is the biggest determining factor.


Mileage limits (depreciation)

The more you plan to drive (higher mileage) the more the car’s value will be depreciated over the length of the lease.

The mileage limit is agreed in advance, and the higher it is, the more you will pay each month.

Exceeding this limit will result in extra fees (see below).


Initial rental payment

If you make a larger initial payment on a vehicle, you will pay less each month afterwards.


Length of lease

A longer lease length should result in lower monthly repayments, although most are between 24 and 48 months. However, the average tends to be 36 months.

Each lease length will have different monthly payments so it's important to choose a lease length that will fit your monthly budget.


Special offers

It's worth hunting around for special offers. 

To get the cheapest car leasing deals, you may have to be a little more flexible on the car you lease, but you should have more money in your pocket. 

You can read our handy article on our 12 tips of how to haggle down the price of a car.


Business car leasing

If you are applying to lease a car under your company, you may be eligible for business leasing.

Occasionally, manufacturers offer special rates for business customers only.

The other main difference between business car leasing and personal car leasing is business car lease holders can claim VAT back on their leasing fees.

However, business leasing is only available to companies and only VAT registered companies can claim money back.


Other costs before, during and after the leasing contract

Vehicle reservation fee

Leasing firms charge a fee to reserve the vehicle you want to lease.

This means they can allocate the vehicle to reserved and can remove it officially from public sale.


Monthly rental fee

This is the sum collected every month for the lease of the car.


Comprehensive car insurance

The vast majority of leasing firms require you to take out comprehensive car insurance (as opposed to Third Party, or Third Party, Fire and Theft).

This covers you against damage done to your vehicle by others, and any damage/injury to other parties that you are deemed responsible for.

As you would expect, this insurance should start on the same day as your lease.


Guaranteed Asset Protection (GAP) insurance

Guaranteed Asset Protection (GAP) protects you financially if your car is stolen or written off.

The main car insurer may only pay out the current market value of the car (with depreciation factored in) - and not the full sum left on your contract term.

It's worth shopping around for GAP insurance to get the best deal.


Maintenance, repairs and servicing

Since you'll most likely be leasing a new car, you'll be covered for faults under the warranty - usually up to three years (sometimes five).

This means you shouldn’t have to pay for such faults.

However, once any warranty has lapsed, you'll be responsible for having any faults repaired.


Maintenance and servicing

A basic annual service will cost around £125. However, leasing firms offer maintenance packages which include routine servicing.

Tyre cover may also be included, or available as an optional extra.

The cost of any maintenance package is added to the overall monthly fee.



MOTs are required three years after registration, then annually moving forward.

This means most leased cars will not need an MOT - since they are new.

MOTs cost £54.85, although any subsequent repairs will be an additional cost.



An obvious one - but choosing a car with a high MPG figure will save you money over the course of the lease.


Cancellation fees

If your financial circumstances change during the course of the lease and you want to cancel, you will be required to pay a termination fee.

This fee could be as high as 50% on the remaining rental costs - which could be a significant amount for someone who, for example, has recently lost their job.


Damage charges

If the leasing firm determines that the vehicle has suffered excessive damage or wear and tear, you will have to pay damage charges.

Fair wear and tear is usually based on the British Vehicle Rental & Leasing Association (BVRLA) Fair Wear & Tear guidelines.

Taking out damage cover could protect against an excessive damage - although it’s another monthly cost to factor in.


Additional mileage fees

When you take out the lease, you agree you won’t drive the car over a maximum number of miles. If you exceed this, you'll be required to pay an extra fee, often on a per-mile basis. 

Whilst this might vary from providers, the fee is usually between 3p and 30p. You will have to check with your finance provider for an accurate amount.

This is usually calculated by taking a number of factors into considerations, such as the vehicle make and model and your total pre-agreed mileage.