Car leasing, also known as personal contract hire (PCH), is like renting. It’s a way of driving a brand new car without owning it. A lease is a financial agreement made with a funder, although leasing is often done through a lease provider who will sort everything for you.

You simply choose the car you want, decide how much you want to pay upfront, how long you’d like to drive it for (usually between 2 and 5 years) and how many miles you expect to drive in that time.

This information is used by a funder to calculate your monthly payments and you can decide if the lease is right for you. If it is, your car will be delivered directly to your door and you get to drive it for the duration of your lease. At the end of your contract – provided there is no damage outside of wear and tear and you have stayed within your agreed mileage – you simply hand the car back to the provider.

Leasing is a popular way to get a new car, but you need to make sure it’s right for you. Here are some advantages and disadvantages to keep in mind when making your decision.

Pros:

• The initial payment is usually low.
• You’ll typically have lower monthly payments.
• The lease payments include road tax and the manufacturer’s warranty will often last for the majority of your lease.
• You don’t have to worry about the car’s depreciation.

Cons:

• You’ll never own the car.
• You’ll face penalties for excess mileage or damage outside of ‘fair wear and tear.’
• Most contracts include fees for terminating your lease early.
• You may have to pay more for specific colours or trim levels.