What is car leasing and how does it work?

In the market for a brand new car? Car leasing might be a flexible option for you. Also known as Personal Contract Hire or PCH, leasing works in a similar way to a long-term rental. 

Find out more about how car leasing works below. 

Car leasing explained

Leasing a car can be a great way of getting to drive a new vehicle without buying one outright.

Car leasing schemes work a lot like renting. You just pay a monthly rental to the lease provider to drive the car for several years. Your monthly payments are based on factors such as the make and model of the car, the length of the agreement and your annual mileage.

If you’re someone that likes to have a brand new car every few years, car leasing could be a good option for you.

The main type of car lease is Personal Contract Hire – or PCH. With PCH, you make fixed monthly payments for 2 to 5 years, then give back your car at the end of agreement.

Is car leasing right for me?

It can be hard to work out whether to buy or lease your next car. That’s why we’ve pulled together the features of car leasing, so you can weigh up whether PCH is the right choice for you.

Key features

  • Fixed monthly costs. Car leasing involves paying a fixed amount each month for the length of your car leasing agreement.
  • No resale worries. You must hand the car straight back at the end of your lease, so you don’t have to worry about selling or trading in.
  • New vehicle. Newly leased vehicles will have the latest features. They’re also less likely to need repairs.
  • Maintenance package. Some providers – including Halifax – can handle any repairs, maintenance and MOT tests for you as part of your PCH arrangement, for an added fee.

Things to consider

  • Can you afford it? Will you be able to afford the monthly payments, even if your circumstances change?
  • Ownership. You won’t own the car during your agreement or at the end of the lease.
  • Damage charges. You’ll face charges for any dents, scratches or scrapes, beyond normal wear and tear. So, make sure your car is in good condition when you hand it back.
  • Mileage limits. Lease agreements have limits on how far you can drive the car. If you go over your limit, you'll pay an excess mileage charge.
  • Termination charge. You will be charged if you want to terminate the lease earlier than planned.

How to lease a car

Leasing a car can be simple, but it’s always best to do your research before you sign an agreement. Here’s a few steps below to consider:

  1. Work out if you can afford it. A lease is like any type of long-term rental. You’ll want to be sure you can afford the monthly costs. So, do your research beforehand and work out what your monthly costs could be.
  2. Select a car. Pick out the car that fits your needs. Consider any extras or specification you may want, such as colour, interior, technology, etc.
  3. Get a quote. Base it on your predicted mileage, deposit and how long you want the car for. Make sure you’re happy with all the terms before you go ahead and apply.
  4. Financial checks. The lease provider will run some financial checks to make sure you can afford your new lease. They might check things like your employment history, existing debts and your credit score. At Halifax, we’ll just do a soft credit check when you get a quote, so this won’t affect your credit score.
  5. Sign. Once your lease is approved and you’ve found a dealer, you can sign the lease.
  6. Pay the initial monthly rental. With car leases, you’ll need to pay an initial monthly rental amount upfront to secure the car.
  7. Get ready for delivery. You could have your new car delivered straight to your door. You’ll also be required to buy insurance at this stage if it’s not offered as part of your lease.
  8. Drive your new car. Make the most of your lease and hit the road in your brand new car. Just make sure you keep up to date with any maintenance to keep your car in good condition.

What happens at the end of your car lease?

At the end of your PCH car lease, you’ll have to return the car to the provider. You’ll then need to submit a new application to start a new lease with a new car.

Keeping your car in good condition is important, as you’ll be responsible for any wear and tear that goes beyond normal use. Any bumps, scrapes and scratches could result in additional charges at the end of your lease.

Keeping your car in good condition

Frequently asked questions

  • It can depend on the provider. Some providers include insurance as part of your agreement, while others do not. It’s important to check the terms of your lease before you sign anything. If it’s not included, you’ll need to set it up yourself.

  • You can lease used cars on some lease agreements. But at Halifax we only lease brand new vehicles.

  • A Personal Contract Purchase (PCP) agreement allows you to purchase the car outright at the end of your agreement by paying off the balloon payment, or return it (conditions apply). The final fee to purchase the car is based on the end value of the car minus the amount you have paid off already. You may also be able to refinance the remaining amount. 

    A Personal Contract Hire (PCH) agreement doesn’t include the option to purchase the car. At the end of your lease, you simply return the vehicle.

  • Car lease agreements have limits on the mileage you can cover with your new car. If you go over your limit, you will pay an excess mileage charge. Some also limit how often and at what times you can drive. The total amount will depend on your lease terms. Check the terms of your lease before you sign anything and discuss anything you aren’t sure about with your provider.

Ready to lease a car with Halifax?

With thousands of brand new cars to select from within our Mobile Banking app or Online Banking, Halifax offers plenty of choice for your car lease. As a Halifax current account customer, getting your personalised quote is simple, only takes a few minutes and it won’t affect your credit score.

Apply for car leasing now

Leasing is exclusively provided by Lex Autolease Limited trading as Halifax. Halifax is a division of Bank of Scotland plc. Bank of Scotland plc. act as a credit broker and not the lender.

Looking for more car finance options?

If you’re not sure whether PCH is the right route to go, you can look at some of our other car finance options:

  • Personal Contract Purchase agreements involve monthly repayments, but you’ll have the option to buy the car at the end of your term, or return the car in good condition.
  • Hire Purchase (HP) agreements split the full cost of the car into fixed monthly repayments – so you can own your car as soon as it’s paid off.
  • Personal loans are an alternative to HP, as you pay for the car outright with the loan, then pay back your loan provider each month. 

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Existing customers

Existing Halifax customer? Manage your car lease agreement online through your Halifax account.

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