How Much Does It Cost to Lease a Car in the UK

Car leasing is an affordable option compared to buying a brand new car the traditional way, but how much does car leasing cost? Here at DreamLease, we pride ourselves on treating customers fairly and helping you understand car leasing, enabling you to find the perfect car lease deal for you. Here we discuss and explore what drives the price of a car lease in the UK and how you can customise your lease agreement to suit your lifestyle. We will also briefly explore damage charges and excess mileage costs.

Average Monthly Car Lease Costs

As you may expect, the monthly cost of a car lease strongly hinges on the overall or total cost of the car. This is sometimes called the on-the-road price or OTR. Simply put, leasing a premium electric car such as a Jaguar I-PACE will cost more per month than a Nissan Qashqai SUV. 

Here in the UK, the average monthly price of a car lease is between £200 and £1000. This range may be wider than you expected however the monthly price depends on many other factors including:

  • The leased vehicle and extras
  • The size of the initial rental
  • Term length & vehicle depreciation 
  • Annual mileage allowance
  • Vehicle maintenance


The Lease Car and Optional Extras

As mentioned above the monthly price of a lease strongly depends on the OTR or total price of the car. Vehicles are often available with additional or optional extras. These extras can be included in your car lease deal and will usually increase the OTR Price and therefore the cost of the lease and the monthly price. Optional extras vary from manufacturer to manufacturer but commonly include:

  • Metallic paint
  • Additional trim such as Nappa leather
  • Driver aids such as rear cameras
  • Performance enhancements such as ceramic brakes
  • Maintenance agreement/packages 


Car Leasing and Initial Rentals

The initial rental* is defined as the first monthly instalment. For example, if your total lease term is 2 years or 24 months you would pay the initial rental plus 23 monthly rental payments to complete the lease term.

The higher the initial rental payment the lower your monthly payments will be, however, the total cost of the lease will stay the same. For example, based on a 24month contract:

E.g. 1 - Initial Rental £1000 - Monthly Rental £300.00 = Total Cost £7,900

E.g. 2 - Initial Rental £2000 - Monthly Rental £256.52 = Total Cost £7,900

*Please note that the initial rental is not a deposit it is part of the overall cost of the lease and therefore is never repaid in part or in total.


Agreement Term & Vehicle Depreciation

The contract length is defined in months and is the total period you will lease the vehicle for. The term starts on the day the car is delivered and commonly ends 24, 36 or 48 months after this date depending on the term selected. 

When you lease a car the agreed initial payment and monthly rental cover the expected depreciation of the vehicle over the lease term. The lower the projected depreciation the lower the total cost. However, if the vehicle depreciates more over the lease term than the leasing funder projected you will not be required to make any additional rental payments as the rental is fixed for the agreed lease term. This is a significant benefit of car leasing, especially in a dynamic marketplace.


Annual Mileage Allowance

The annual mileage allowance is the total miles you plan to drive the vehicle each year. DreamLease commonly offers between 5 and 20 thousand mile contracts.

Please note that the total mileage driven is only noted at the end of the contract term. For example, if you select a two-year lease term and an annual mileage of 5,000 miles a year. As long as at the end of the two-year term you have not exceeded 10,000 miles then no additional charges will be levied by the funder.

The higher the annual mileage allowance the higher the monthly cost will be. It's worth noting that additional miles are charged at the end of the lease term. At the time of writing (30/06/2022), the charge could be as little as 8p per mile. In this case, an additional 2000 miles would only cost £160.00.


Vehicle Maintenance and Leasing

Vehicle Maintenance is an optional extra and can be added to a lease contract for an additional fee. These contracts differ from funder to funder but typically include all scheduled maintenance, tyres and breakdown cover over the lease term.

Adding a leasing maintenance package provides reassurance that the car will be maintained correctly throughout the lease term and protects you from many surprise costs.

Adding car maintenance will increase the cost of a UK car lease and commonly can cost between £10 and £70 per month depending on the provider, vehicle brand, model and vehicle specification.