How is the cost of a lease car calculated?

Car leasing costs are calculated using several key factors:

• Car make and model: The value or purchase price of the vehicle may affect the leasing cost price
• Length of the contract: Typically between two and four years
• Annual mileage allowance: Higher mileage increases cost
• Initial rental payment: A larger upfront payment reduces monthly rentals
• Optional extras (e.g. paint, trim level, and wheel spec – initial and monthly payments can increase as they raise the vehicle’s overall on-the-road price)
• Additional contract options (e.g. maintenance and insurance)
• Processing fee (varies depending on the leasing company)

Together, these factors help determine a vehicle’s estimated depreciation – the difference between the car’s value at the start of the lease and its expected value at the end of the agreement. Your monthly lease payments are based on this change in value, rather than the full purchase price of the vehicle.

For example, a compact hatchback such as a Toyota Aygo will typically cost less than a larger SUV like a Kia Sportage. Premium or electric models, such as a BMW 3 Series or Tesla Model 3, usually come with higher monthly rentals due to their higher on-the-road prices.

Car leasing costs: Before the lease

When you take out a lease agreement, there are three main costs involved to begin your contract.

Initial rental payment

The initial rental cost is a similar concept to a deposit. However, unlike a deposit, this payment forms part of the overall price of the car and is not repaid. The amount is based on your instalment cost, and you can usually pay between one and 12 months of initial rental upfront. Generally speaking, the more you pay, the less your monthly instalments will be over the contract.

Find out more about initial payments in our guide.

First monthly payment

Alongside the initial rental, your first monthly instalment is also due. It’s worth noting that some finance providers may include the first monthly payment within the initial rental amount, rather than taking it separately. How payments are structured can vary, so it’s always best to confirm the payment breakdown before entering into an agreement.

Processing fee

Most car leases incur a standard processing fee at the start of the lease. At Leasing Options, this is a one-off charge of £349.99 (including VAT).

Car leasing costs: Before the lease

During your car lease, you can expect to pay the following:

Monthly instalments

Your car lease agreement sets out the monthly payments for your vehicle. These are fixed throughout the term, so you don't have to worry about interest hikes or market fluctuations.

Insurance

All lease cars must be covered by fully comprehensive insurance for the duration of the agreement. This should cover damage to the vehicle as well as third-party liability, and the policy must start from the day the car is delivered.

Some drivers also choose Guaranteed Asset Protection (GAP) insurance. This can help cover the difference between an insurer’s payout and the outstanding balance on a lease if the vehicle is written off or stolen. Whether GAP insurance is suitable will depend on your circumstances and the terms of your lease agreement.

Businesses and individuals can arrange their own insurance and may want to compare policies to find the most suitable cover and price. To get an overview of insurance costs, use a comparison tool for various policy options. You can also opt for an insured car leasing package. For example, our Fuel & Go solution includes insurance and maintenance for an extra cost.

Fuel/Electric

Whether you choose a traditional petrol or diesel vehicle, or an electric car, you'll need to factor in the cost of fuel or recharging during the lease.

Maintenance

It's essential to keep on top of the servicing and maintenance of your lease car. This includes following the manufacturer's guidelines on service intervals. You should also visit an approved garage to carry out any repairs and keep records of work carried out. If your lease term is up to three years, there's no need to worry about MOTs. But if you are leasing for longer, these also need completing.

Alternatively, you can choose a maintenance package add-on with your contract for an extra charge.

Most car leasing contracts last between two and four years. Government legislation states that cars have to undergo an MOT every year after they turn three years old.

But if you take out a maintenance package, you don't have to worry about MOTs, servicing, or routine repairs for the duration of your contract. A full list of what's covered is available in our guide to leasing maintenance packages.

A maintenance package will increase your monthly payments overall but ensures you won't face any expensive, surprise repairs later.

It's also worth remembering a new lease car will be under the manufacturer's warranty, so any faults that don't appear as a result of excessive wear and tear or negligence will be free to repair.

Cancellation fees

Ending a lease early is usually possible, but it can come with a cost. If you return a vehicle before the end of the agreed term, an early termination fee is likely to apply. Charges are typically based on factors such as the remaining contract length, agreed mileage and any outstanding costs.

If your circumstances change, it’s best to contact your leasing provider as soon as possible to request a termination quote. At Leasing Options, all car lease agreements include a 14-day cooling-off period at the start of the contract, during which you can cancel without an early termination fee. After this period, cancellation charges will usually apply.

Car leasing costs: At the end of the lease

In most cases, there are no costs at the end of the lease when you hand your car back, but you may incur charges due to various factors such as:

Excess mileage charge

Your contract has an agreed mileage allowance. However, if you exceed this, an excess mileage charge is calculated based on the miles you've gone over.

At Leasing Options, this charge could be as little as 5p per mile. But if you're nearing the allowance, it's best to speak with an account manager to assess the best options to avoid hefty charges.

Before taking out your lease, it's helpful to gauge how many miles you'll need in your contract. To work this out, use our Annual Mileage Calculator for an accurate guide.

Fair wear and tear

Every lease car is covered by a fair wear and tear policy. This means it's expected that some wear and tear may be present. But excessive damage outside of the guidelines will incur a repair charge. This cost will be invoiced to you at the end of the contract.

For more information about what happens when you return your car, check out our end of car lease guide.

What about extending or transferring a car lease?

In some situations, it may be possible to extend or transfer a car lease, depending on the terms of the agreement and the finance provider. Not all leases are eligible, and both options may involve additional checks or costs.

Extending a lease

A lease extension allows you to keep the vehicle for longer once your original agreement ends. This can be arranged in two main ways:

• Formal extension: A new agreement is put in place with updated terms, such as revised mileage allowances and monthly payments. This provides clarity and structure but may result in higher costs depending on the vehicle’s age and condition.
• Informal extension (rolling contract): Some providers may allow the lease to continue on a short-term or month-by-month basis. While this offers flexibility, rolling contracts can come with higher monthly payments, limited mileage allowances and less certainty over how long the arrangement can continue.

Transferring a lease

A lease transfer allows you to pass the agreement to another individual or business, which can be a way to exit a lease early without paying full termination charges.

Transfers are subject to approval by the finance provider and usually involve eligibility checks and administration fees. Not all leases can be transferred, and responsibility only passes once the transfer is formally completed.

If you’re considering extending or transferring a lease, speaking to your leasing provider as early as possible can help you understand what’s available and any costs involved.

What fees do you avoid with Leasing Options?

Leasing a car with Leasing Options offers an affordable way to drive the latest vehicles. In addition, you also avoid various fees that typically come with lease agreements, such as:

• Road tax: This is included in your car lease for the whole term, so you could save hundreds each year. It's particularly beneficial for those leasing cars valued at over £40,000 as you avoid the premium car tax surcharge of £355 per year.
• Delivery: No matter what car you choose, it'll be delivered to your designated address free of charge.
• Registration fee: Your new car is registered with the DVLA before it's delivered, so you won't have to pay this fee.

What car can I lease for my budget?

The car you can afford to lease will depend on how much you can comfortably spend each month, without stretching your finances to the limit. This involves looking at your guaranteed monthly income against your regular outgoings.

Before picking the car you want to drive, consider:

• The maximum amount of money you want to spend every month
• How much of an initial payment you can make
• How many miles a year you expect to drive
• Whether you want additional maintenance and insurance

Once you’ve set a budget, you can start narrowing down vehicles that fit within your price range.

Typical monthly car leasing costs by vehicle type

Lease costs vary significantly depending on the type of vehicle you choose. As a general guide:

• Hatchbacks: from around £110–£485 per month
• Coupe: £298-£430 per month
• Estates: typically £180–£600 per month
• SUVs/crossovers: often £128–£750+ per month
• MPVs: £210-£950+ per month
• Premium or performance models: can exceed £700–£1,000+ per month

Different body styles, specifications and optional extras will also affect the final price, so checking current special offers can be a useful way to find competitive lease deals on selected models.

If you have a specific manufacturer or model in mind, use our handy Compare Tool to find the best vehicle for your budget.

You don't need to worry about shopping around either, as we work hard to offer the most competitive prices on all our deals. But if you do happen to find a cheaper quote, we guarantee to beat it with our Price Match Promise.

Not sure which car you want? Search for a lease deal now. We have over 30 makes to choose from, and you can even sort cars by budget, so it's simple to find the right vehicle you can afford.

What are the cheapest cars to lease?

If you're looking for an affordable leasing deal, check out the five cheapest lease cars at Leasing Options*:

1. Vauxhall Frontera
2. BYD Dolphin Surf
3. Suzuki Swift
4. Seat Ibiza 
5. Renault Symbioz

*Prices are subject to change.

Is leasing cheaper than buying a car?

Leasing is often cheaper month to month than buying a car outright or using traditional finance, as you’re only paying for the vehicle’s depreciation rather than its full value. This usually results in lower upfront costs and more predictable monthly payments.

Buying a car, whether outright or through finance, typically involves higher initial costs and longer-term commitments. While ownership may suit those planning to keep a vehicle for many years, leasing can be a more cost-effective option for drivers who prefer fixed costs, shorter commitments, and regular access to newer models.

The cheaper option will ultimately depend on your budget, how long you plan to keep the car and how you prefer to manage running costs. If you’re unsure whether leasing or buying is the right option for you, our guide on leasing vs buying a car explores the differences in more detail.