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.

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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 →

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.

davidce 05/09/2017 at 3:47 pm

I have a Car on Lease for 18months, It has been in and out of the garage since. The latest issue has resulted in the car being in the garage for 6weeks, without a known resolution.
At what point can I say I don;t want it back.
The car I have been given is not similar in lease cost and is not the same fuel type.
Technically I am paying full price for a leased car and actually getting a car that is £117 cheaper to run.
What are my consumer rights?
I have spoken to the lease company and they are failing to engage with me. The Lease is with the manufacturer direct.

ConsumerRightsExpert Editor 07/12/2016 at 12:29 pm

In general your consumer rights when you buy a car state that you are entitled to a repair or replacement within the first 6 months (but the retailer can choose which option). With a lease car you should contact the lease company and ask them what they propose to do about it. It might be worth seeking the advice of a lawyer here as this is such a safety hazard.

Rob 06/12/2016 at 2:40 pm

I have a 2016 Kia Sportage on lease and around 4 months ago had a problem where the dashboard lit up more or less every available fault light then the steering was lost. Car went in and was repaired after several weeks of investigstion. Last week the same situation only this time was being driven by my partner with my 8 month old daughter in the rear and steering was lost at 70MPH on the motorway and was stuck in a live lane! My partner has vowed she will never drive it again and I want rid of it! Kia customer service have been some of the worst I've ever experienced. The car is currently in the garage however I dont want it back and just want to end the lease. I want nothing more to do with Kia or the vehicle. What are my consumer rights in this situation?

Lol 13/11/2016 at 6:43 pm

I leased a mitsubishi barbarian new in sept 2014 now covered 30000 miles. in the last 3 months it has been back to the dealership 5 times for the same issue (juderring/ misfire) where do I stand on this I am paying a lot a month and it is not serving it's purpose.

ConsumerRightsExpert Editor 30/09/2016 at 10:15 am

We suggest you tell the dealer you want to return the vehicle for a replacement or a refund/cancellation of the lease agreement.

Jemima 28/09/2016 at 11:16 pm

We have recently entered into a lease on a mazda 6. On arrival at our local dealer the car was not locking and so we did not get the car on the agreed day - the car was 'fixed' and we received it 4 days later. Since then it has gone back on 2 more occasions with the same problem ....what are our rights if the problem continuum especially to recurr? The car arrived on 16th September and was delayed until 21st, went back on 22nd and again today 28th!

Mrwhippy 27/09/2016 at 3:56 pm

I've just leased a Nissan xtrail but on its delivery journey it was damaged by the driver the lease company are saying they want to repair it and get it to me in 2weeks but I'm not happy with this and have asked for a replacement vehicle . This they are refusing to do stating it's still a new car even though damaged and repaired and that because it's leased it's not mine and I won't loose out on any value when sold !!! Please help on were I stand in relation to this and can I insist on reduced payments as it has been damaged so technically not a new car as it's value has been reduced thanks

Kitty 24/06/2016 at 10:33 pm

I took the car out on Nov 15.
I'm struggling financially and going to hand car back where do I stand I really can't pay it anymore things have changed.

ConsumerRightsExpert Editor 20/05/2016 at 2:23 pm

Was this a new car or used?

Wee ian 18/05/2016 at 1:11 am

I have had a ford kuga for about 15 months now and after having the car for four months the engine blew up and the car was taken to the garage it needed a new engine I got the car back after a month and was told it was safe but after 1 day the car was back in the garage and it smelled of oil for about two months after that and I have been plagued with problems ever since and the hire purchase company refuse to help

ConsumerRightsExpert Editor 18/04/2016 at 2:00 pm

Contact you leasing company and ask them what they advise you to do.

Deano 16/04/2016 at 8:58 pm

I have a brand new 2016 Mitsubishi outlander phev on a business contract hire, and the paint has come away in little round marks all over the car, bonnet, drivers door, passenger side does any one know how I stand legally with this.

Thanks for your time dean

Lorrlunn 24/02/2016 at 1:19 pm

Hi, took receipt of a Citroen C1 (56 plate) on the 11th Dec 15 (1st registered 4th Dec 15). Mid January 16 the car failed to start...taken to local Citroen garage where they diagnosed a 'software issue' after 3 days. The car failed to start again for a 2nd time around 2 weeks ago but it started the next morning (??). Last night it failed to start for the 3rd time with the same symptoms and it's now been towed to a Citroen garage. Surely this vehicle can be deemed as unfit for purpose? As I now have no faith in the car as its so intermittent at not starting. How many times/chances is feasible for the garage to fix it? Any advice would be appreciated. Thanks

EKA 16/12/2015 at 4:31 pm

Hi All
So i currently have a car on credit but the company appear to have gone bust (Credit car sales essex). I think they're under serious investigation for fraud. All their websites have been taken down and no one picks ups their phones (mail box full).

I've received no correspondence in the post and i cant find anything about it on line

What does this mean for me?

Any advice would really help!

Bonzo6 12/11/2015 at 3:34 pm

Hi, I have a kia sorento on a 3 year private lease. I've had it 4 weeks and done just under 1,000 miles. In those 4 weeks I have had to be recovered by the RAC twice as there has been an electrical problem with the vehicle. I don't trust the car anymore and have 3 young children so I'm concerned that the next time they could be stranded with me. I feel that I've been given a 'dud' and want to know my rights before I complain properly. Do I have any rights to reject the vehicle and get a refund or can I insist on a replacement car ? If neither then how bad would it need to get before I can view then as breaking their end of the contract ?

Thanks
G

kristel 25/10/2015 at 11:31 pm

Hi There

I am currently in my 3 month of a 3 year contract.

I have recently had an accident causing damage to my driver rear side door. No other person or car was involved.

Am I covered under warranty for this to get fixed from the main dealer nissan or is it my responsibility to have that fixed?

Kind Regards

Kristel

ConsumerRightsExpert Editor 07/10/2015 at 11:35 am

The problem is that the dealer would not have known or been aware of the problem when you were sold the vehicle. You have also not said how long you've owned the vehicle or how much use you have had from it...so we cannot really say how your consumer rights can be used anyway. VAG is currently putting together plans to recall the relevant vehicles to rectify the problem, so you should wait and see what comes of that.

Anna 06/10/2015 at 6:30 pm

Hi,

I have a Scirocco 2.0 TDI Bluemotion which has been affected in the VW emissions scandal. Would this give me grounds to cancel my hire purchase agreement and give the car back as I feel like I've walked away with a car that wasn't what they advertised.

Thanks,

Anna

ConsumerRightsExpert Editor 29/07/2015 at 2:49 pm

@Biggsy. Really whether it's a known fault or not, you should get a better response than you have. The car is not fit for purpose if bluetooth is included as part of the sale. If the dealer had known about the fault and not told you, you could have returned the vehicle under the misleading practices legislation. As it is, contact the lease provider and see what the options are.

Biggsy 28/07/2015 at 7:34 pm

No the fault was not mentioned, it was by reading The car manufacturer forums that I realised it was an ongoing issue that they didn't know how to fix.
Would you say I have a right complain and request some form of compensation , plus who would I draft the letter to ? The leading company , the finance company , or the actual dealer ?
Thanks
Biggsy

ConsumerRightsExpert Editor 27/07/2015 at 2:28 pm

@Biggsy. If it's a known fault, were you informed of it at the time of taking out the lease?

Biggsy 25/07/2015 at 1:57 pm

Hi, I am currently 3 months into a 2 year lease and I have noticed a problem with the Bluetooth connectivity of my in car media centre, under the warranty I booked my car in to the service centre to have the issue resolved, however I received a call from the dealer saying that it is a known fault and there is nothing they can do at the moment.
Do I have any rights regarding the fault , can I contact the leasing company and request some form of compensation, after all the bluetooth system was a large factor in choosing this vehicle.
Thanks for your time .

Biggsy

Sherbet 23/06/2015 at 5:23 pm

Our sons 1.4tsi Scirroco needs a new engine due to piston number 4 going at 46.000 miles and 4 and half years old. Our local garage says it is a common fault and after researching it we absolutely agree. Volkswagen have agreed to pay for the engine, but our son has to pay £3500 for labour. He leased the car 2 years ago through Players Cars and none of us realised that it only had a year left on the warranty. In all the other cases we have researched, no one has had to pay so much towards the labour. The finance company who own the car don't want to know either, even though the car can be given back for no fee in September. What car ran an article in 2013 about this problem, saying it is a known fault with that engine,but Volkswagen say it is not a recognised fault. Can you give us any advice please?

ConsumerRightsExpert Editor 18/05/2015 at 12:42 pm

@beth. if it's a common fault then you could try the manufacturer. Is it expensive to fix?

Beth 13/05/2015 at 4:37 pm

Hi there
I have a lease car which I had from new in October. In April we noticed that a strip had come off the roof. We researched it and it's a common problem with the model of car, and a design/ manufacturing fault. We did what was expected and notified the lease company who booked it in to the manufacturer for repair. We have now been told I have to pay because it's not covered under maintenance. Is there anything I can do? Would you advise speaking to the manufacturer? Thanks for any advice.

ConsumerRightsExpert Editor 25/02/2015 at 2:28 pm

@johnny. Really as you are dealing directly with the lease company they should provide you with the courtesy vehicle and attempt to reclaim this from Ford. It does however depend on the terms of the lease which you should read through before proceeding further.

Jonny 23/02/2015 at 4:56 pm

My finance lease van, through no fault of mine needed a new engine which was done under warranty. I was not offered another vehicle so hired a vehicle for 3 weeks to carry on my business, prior to hiring this vehicle i begged and borrowed a vehicle to pull my trailer. The lease company (Lombard) said they would try and get my vehicle hire paid by Ford, I sent a coipy of the hire invoice to Lombard and said that "if Ford do not pay an adviser said Lombard are liable for the hire fee and I should also receive a months lease fee back". Lombard say they are not liable for my losses.
Please can you tell me if Lombard are liable for any of my loss, all of my loss and which bit of the loss.
Regards Jonny Baker

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