Leasing a Car Explained

Author: Chris Nickson

Many people buy their cars, either hire purchase or with cash. But there's also the option to lease a vehicle. This happens more with businesses that offer company cars to employees. But car leasing can also seem like an attractive option for individuals, since it requires no deposit - however, you will be asked to pay a fee generally equal to the first three months' rental.

Types Of Lease

An operating lease, or contract hire, means that the car is hired for a fixed period (between 18-60 months), and a fixed rental is paid, based on the anticipated mileage to be used. It can come with or without a maintenance agreement. At the end of the lease the vehicle is returned to the finance company, which re-sells it. As much as 100% of the cost of rental can be offset against taxable profits and up to 100% of VAT on the leased car can be reclaimed, depending on the situation.

Under a finance lease, the leasee takes responsibility for selling the vehicle at the end of the lease period to settle a pre-agreed residual payment. A payment equivalent to the estimated future value is payable at the end of the contract. At the end of the contract period, the vehicle is sold and if the sale amount exceeds the residual payment, the lessee keeps the difference.

There's also lease purchase, under which the lessee owns the vehicle after all payments, including the option to purchase payment at the end, are made. Lease purchase is a cheaper monthly alternative to hire purchase, the traditional method of financing, and is written on a hire purchase agreement with the protections afforded by the Consumer Credit Act. A personal lease has a residual payment incorporated into the lease. If the lessee pays it, he owns the vehicle. Alternatively, it can simply be returned to the finance company.

Car Purchase Rights Checker

Bought a faulty car? Find out exactly where you stand legally. Takes 1 minute.

Try our Car Purchase Rights Checker free, here on this site →

Your Responsibilities

When you lease a car, you're entering into a contract. That gives you certain responsibilities to take care of the car and return it in a certain condition - as with any contract you should read the small print. Different lease companies set different conditions, so sit down with your contract and read through it carefully.

You'll also need to have your car serviced at regular intervals at a franchised dealer or approved servicing agent, usually every 12,000 miles, or as specified by the manufacturer or leasing company. Unless you have a maintenance agreement on your lease, you'll need to arrange and pay for this yourself.

You'll be responsible for obtaining insurance on the car, and (depending on the type of lease) keeping up the road fund tax.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Returning the Car

You need to be very aware that the car must be returned in good condition, with an allowance for fair wear and tear. The finance company will have the vehicle inspected, and you'll be assessed a charge for excess wear and tear as shown under the guidelines of the BVRLA - British Vehicle Rental and Leasing Association. Charges are most often assessed for:

rips, stains, burns and tears on seats.
damaged or scratched paintwork.
bodywork chips and dents.
damaged wheels and trims.

The bill can come as an unpleasant surprise, so about five weeks prior to returning the car; you should begin your preparations, fixing any damage, including cracked windscreens. Gather together all the keys and documentation that came with the car. If you've fitted any non-standard equipment (which should only be done with permission) it should be removed before returning the car.

Problems

If there's damage or any other problem with your car which is due to a manufacturing or design fault, then this issue is between you and the dealership, and it's your responsibility to deal with any issue before you return the car to the lease company, and ideally at the point when you notice the fault. Manufacturing and design faults can include such things as corrosion and tarnishing of exterior trim and fittings, paint or coatings peeling or falling off.

In the event of a problem between you and the leasing company that can't be resolved, you can contact the BVRLA (if the company is a member) and fill out a complaint form on their web site. They'll write to both parties to resolve the complaint. If that doesn't work, they'll forward the relevant details to a conciliation committee. You'll hear a decision within 30 working days. Using their conciliation service doesn't preclude your right to take separate action.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Car Purchase Rights Checker lets you bought a faulty car? Find out exactly where you stand legally. Takes 1 minute. Try it now →

Showing 20 of 47 questions

Ask Consumer Rights Expert a Question

ConsumerRightsExpert Editor 26/05/2026 at 8:41 am

@C You actually have decent leverage here. Under the Consumer Rights Act 2015, a leased vehicle must be of satisfactory quality and fit for purpose, and a car you can't charge normally clearly isn't. Put a formal complaint in writing to the lease company stating the car is not fit for purpose, demand either a like for like replacement vehicle or early termination without penalty, and claim back the extra charging costs (keep receipts). If they refuse, escalate to the Financial Ombudsman Service, as most lease agreements fall under their remit. Also loop in your employer's salary sacrifice scheme provider, as they often lean on the leasing firm to sort things faster.

C 26/05/2026 at 7:17 am

I am 1 year into a 3 year lease through the EV Salary Sacrifice scheme. The car's charging port has failed, Vauxhall cannot give any time frame for a replacement part, the car cannot be charged on home or slow chargers but can still be charged at the rapid chargers but this is not feasible as my costs have increased by 2125% in 30 days. The lease company has basically said tough, do I have any options available to me?

ConsumerRightsExpert Editor 22/05/2026 at 9:17 am

@Angie Tricky timing on this one. Check your lease agreement carefully, as most contracts make the lessee responsible for maintenance and repairs during the term, meaning you'd be liable to return it in working order or face a hefty end of contract charge. Get a written diagnosis from a garage first, as a turbo failure under 3 years could point to a manufacturing fault even outside warranty, which the finance company or Mitsubishi might cover under the Consumer Rights Act. Worth ringing the leasing company before handing it back.

Angie 22/09/2023 at 4:58 pm

Hi, 3 year lease on a Mitsubishi L200 pick up, turbo has gone and not under warranty, due to be returned this week, what are our options please

TraceyB 02/08/2021 at 12:42 pm

We have recently returned a Volvo v40 to the lease company. An assessor carried out an assessment on our drive listing scratches and damage to an alloy wheel (slight rust no scratches) which he exaggerated as being scratches into the paint, which they were not, and scratches to the alloy, which there were none. We argued with him at the time and even rubbed one of the scratches off to show it was minor and Aldi showed him the alloys were smooth so there was no scratching. He said as he had completed the form he could not change it. We have now had a bill for over £400 for damage that did not exist beyond normal wear and tear. We have argued with the lease company but they have not taken into account any of our comments. We are gong to refer the matter to the BVRLA as as feel this is just a money making exercise. The car has gone to auction so we don’t believe any alleged repairs have even been carried out. Can anybody provide any advice on how we should proceed?

monkey261 16/02/2021 at 10:09 am

hi .i have a leased car,vw polo.63 plate.leased it over 4 years,had it 3 years,engine light and esp light started to come on in the dashboard.took it to a garage .they said its the turbo,and would be over a thousand pound to repair.the car is almost perfect in evry other way ,only done 13,000 miles in 3 and ahalf years.will i have to fix the turbo before handing it back.

Andy 15/01/2021 at 3:17 pm

I have leased Fiesta diesel supplied with fitted dual controls used as a Driving school car. I have had it from new, the lease was 36 months but extended to 42 month due to covid 19. I’m 24 month in the term but for the last 11 months it has been into Ford main dealer 4 times with a problem they cannot solve.
It is contaminating it’s own oil with fuel due to the nature of its daily drive, not fast enough for long enough. The car is only lasting on average 1,500 miles before asking for an oil change, and engine management light coming on, therefore the car is off road. The lease company are very reluctant to do anything to help and I’m going round in circles. I’ve asked to reject the vehicle, offering to swap to another fuel type/ transmission as Ford Uk have no solution.
What are my rights, I’m thinking of going to the financial ombudsman as I’m paying a monthly fee for a faulty or car not fit for purpose.

PJ 05/10/2020 at 11:43 am

I leased a VW eGolf in January for a 24 month term. It has persistently not started (about 7 or 8 times) with the dashboard warning saying "Electrical Fault". When this has happened at my home, the car eventually started when I tried it some time later. The last two times I have been away from home and had to get a recovery service. My car has been at the dealership for a total of three weeks now and my courtesy car is a petrol car Skoda 19 plate (eGolf is 69 plate). At first they said it just needed a software update but when it happened again they are now replacing all the batteries, which they have ordered from Germany. They cannot give me a date when it will be fixed. So in the meantime, I'm paying for a car I cannot drive and having to pay for fuel (electrical charging is free where I work) for an older car. What are my rights?

Rs14187 04/08/2020 at 11:00 am

we paid a deposit on a car which we were leasing. We was told when we return the car we will be given the deposit back.
We have recently found out that 'said company has gone bust. (Never bothered to let us know)
How would we get our deposit back now?
Thanks in advance!!

Immy 26/05/2020 at 8:13 pm

Hi I'm just over 3 years into a 5 year lease on a ford wildtrac pick up it's done just over 100k mileage and was service at 97k. I have a reputable mechanic who services the ranger at all of the given service intervals. Last week.on my way home from work the vehicle had a part failure which damaged the oil filter which starved the engine of oil which has now seized. The lease company say this is my responsibility and I should have to pay all costs is this correct.

Mike 09/01/2020 at 5:25 pm

I have leased a new Audi A7 over 4 years, had it 10 months from new. It has developed issues when driving and 8 electrical faults on lights. Because this is over 6months where do I stand?
Thanks

Stevo 23/12/2019 at 5:42 pm

In 2015, I leased a car from VW finance for 24 months, in 2017 the car was duly returned and a further lease for its replacement made.
Incredibly - today I’ve just received a letter (having received nothing prior) from a debt recovery company (DRS) asking for payment for excess mileage and minor damage repairs for a car that I’ve not had use of for well over two years now.
I’d be very grateful to hear if anyone else has experienced similar issues? Any advice or knowledge of consumer rights greatly appreciated - can they get away with this? Given no prior notification and time elapsed - it doesn’t seem right to me...

Frank 20/12/2019 at 9:49 pm

I took delivery of KIA Sportsge on 13/11/19. It has had numerous faults since then and is currently at a local KIA dealer for repair. There is no part available and the dealer cannot give a likely repair date. (March 2020) has been mentioned!! I have asked the Lease Company (Arval) to replace the car or terminate the lease, which they have refused to do. Am I within my rights to return the car and refuse to make any further payments?

Chris 02/07/2019 at 8:13 pm

Hi, I have been renting a car to use as a taxi. Recently I got a flat tyre and took it to the garage. They have informed me that the tyre was on the wheel the wrong way so therefore unsafe to drive and the car should not have even passed the mot. Should the car rental company be liable for this and as they have not supplied a car fit for purpose, or legal to drive, am I entitled to receive my money back?

robwak 24/04/2019 at 3:17 pm

I have leased a 2016 VW Golf R for 3 years and just extended for another year. The warranty expired 2 months ago and the water pump had just failed. It has covered 50k miles. A cursory bit of internet research shows this is a common problem on this model. I now face a bill for almost £1000 all in. Surely a water pump should have a much longer life expectancy than this and it is a known manufacturing fault. Can I seek redress in any way from the lease company of VW or do I just have to swallow the cost..? Any advice welcome.

benny 25/01/2019 at 9:29 am

Hi i am 5 months into a 36 month lease with a BMW M4 , the ECU has just died and the repair cost is astronomical, there is a 6 month Warranty on the car but that doesn't cover the ECU , lease company has said they will pay up to £500 to get it fixed but that wont even cover the labour charge , can i reject the car ?

Ali 07/09/2018 at 7:22 am

I have 3 payments left of my lease purchase but the lease company has gone bust
Where do I stand

GM 28/02/2018 at 12:13 am

I am 18 months into a 36 month personal lease agreement on a Ford Ranger.
My first break down was about 2 months into the lease.
Between months 12 and 18 I've had a furth 2 break downs and two instances where the car wouldn't start.

The car has spent a total of 60 days in the garage being repaired.
That's 3 breakdown when driving and 2 occasions where the car wouldn't start all in 18 months.

These were all mechanical or electrical faults, requiring a new fuse box for example. None of the faults related to wear and tear items.

I have no faith in the car now and would like to end the lease because I believe its a defective car not built to a reasonable quality and not fit for purpose.

The finance company (named on the lease) are holding off waiting for a reply from Ford (who are not named on the lease)

Debz 20/09/2017 at 9:51 pm

I have had my fuel and go lease car 18 months.2 months ago the heating went. I booked it in for mtce with the dealership. It was collected from my home no warning lights, no temp increase driving well. First diagnosis leaking coolant further investigation required. Told unless it's a warranty issue I can't have a temp. After the weekend the story changed there was no coolant, no radiator cap and needs a new engine and so non warranty. I've never been under the bonnet last time anyone was it was at service 7 months ago or 10k ago had the radiator cap been off it would have blown up. Lease company and dealership are arguing and I'm sat here carless. A report has been independently commissioned to establish if a warning light has been on and gone off or I've ignored it and if it's on now when, I know I've not seen a light and had there been one surely the mechanic who collected it wouldn't of driven it, I hope the report clears it up And shows the dealership to be the rogues I suspect they are I don't know why it won't but I'm worried sick and don't know my rights

ConsumerRightsExpert Editor 07/09/2017 at 11:31 am

How long is it since you took out the lease? If it's less than 6 months you can demand a replacement or refund (for what you've paid so far less depreciation etc) as you've allowed them garage sufficient time to try and resolve the issue.

Show All 47 Questions

Ask Consumer Rights Expert a question

Ask our editorial team a question and we will reply with our advice. Tell us as much about your situation as you can: the more detail you give, the more useful our answer can be.

You do not need to use your real name. Please do not include your full address, phone number, email address, or the names of other people. We may edit or remove identifying details for privacy and legal reasons.

Comments are moderated before publication.