How does Personal Car Leasing Work? A Guide

Personal Car Leasing is increasingly popular as an affordable and stress-free way to drive a new electric car. It means that when you’re considering a new car or van, you need to ask the question, should I buy or lease a car?

In general terms, personal car leasing means paying for it in instalments – a bit like your smartphone contract or renting a house. There’s an upfront fee followed by monthly payments over the course of a few years (normally two to four). At the end of the contract, you can decide to hand it back, extend, upgrade or keep the car.

If you settle on leasing as your preferred option, there are several different ways you can finance the car. Personal Car Leasing is commonly categorised under two main finance types: Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). Each have their individual rules and benefits and understanding the differences is crucial to picking the leasing deal that’s right for your circumstances.

At GRIDSERVE, we specialise in PCH, as well as business leasing, fleet solutions and salary sacrifice.

What is Personal Contract Hire (PCH) leasing? 

Personal Contract Hire (PCH) is a hire plan for your vehicle with no option to ever own it. You’ll pay a small deposit up front (usually equivalent to a few months of instalments) then make monthly payments for a fixed term (normally for 24, 36 or 48 months) with an agreed annual mileage. At the end of the contract, you hand the car back.

The monthly payment amount is based on the value of the vehicle now, how much it’ll be worth in at the end of the lease, the length of lease and how many miles you’ll cover each year.

What is the difference between Personal Contract Hire (PCH) and Personal Contract Purchase (PCP)?

PCH and PCP are the two most common ways to finance a new vehicle. The biggest difference is that with PCH, there’s never an option to buy the vehicle at the end. The table below gives a clearer indication of each to help you decide which is best for you.

What should I consider before leasing an EV?

Like any financial commitment, you need to make sure that a lease deal is right for you. The benefits are big but it’s not for everyone – especially if your financial circumstances or vehicle requirements are likely to change during the course of a lease, as exit fees can be expensive. Here’s a few other things to consider before signing on the dotted line:

• Know your budget: Leasing is an affordable way to get into a high-end, new vehicle but don’t stretch yourself. Be realistic about both your deposit (don’t empty all your savings) and what monthly payments you can afford, considering that you’re committed to this repayment for a few years.
• Do you need GAP insurance?: Guaranteed Asset Protection (GAP) insurance protects your bank balance if your lease car is stolen or written off. Your insurer will only pay out on their valuation of the car (which will take into account depreciation) and this will be significantly less than the amount it’s worth to the leasing company. GAP insurance will pay you the difference so you’re not out of pocket. It’s not essential but speak to your leasing company about their T&Cs to understand if it makes sense to take out cover.
• Don’t underestimate your mileage: Excess mileage fees at the end of a lease can be an unpleasant cost when handing the car back so making sure you’ve agreed a realistic mileage limit at the start of the contract is vital. Think about your yearly mileage over the years and consider if your circumstances are likely to change.
• Long or short contract?: As a general rule, a longer term lease will mean lower monthly payments across the length of a contract, but it also means you’re committed to that vehicle for that length of time. Think about how things might be different for you – both work and private life – to see if shorter term flexibility is more important than initial monthly savings. Cancellation fees can be expensive.
• Look into a maintenance plan: With a lease, road tax, MOT and breakdown are all covered but scheduled servicing and maintenance is not. If you want to budget for this as well, then look at taking out a pre-paid plan for the duration of the lease which will spread the cost of servicing over the period.

The benefits of leasing an electric car

The benefits of leasing are magnified when you choose to lease an EV compared to buying outright.

• You pay less upfront: Compared to buying outright, you’ll start making savings straight away with a lease with only a small deposit to pay.
• It’s an affordable way to drive a new electric car: As upfront costs are lower and you’re spreading the cost, it means you’ll be able to drive a much newer electric car with the latest battery and safety technology than if you were buying outright.
• You get a new car every few years: Hire contracts typically last between two and four years and at the end of each deal you can upgrade to a new vehicle. Ideal for making sure you’re getting the best electric car technology.
• Monthly payments are fixed: Leasing allows you to budget and keep your finances in check by fixing the monthly instalments for the duration of the lease.
• You won’t get stung by depreciation: With a lease you never own the vehicle which means the depreciation a new car experiences as soon as it’s driven won’t affect you. There’s no need to worry about residual values and how much the car will be worth after three years.
• You don’t need to worry about selling: When you want to switch cars, it’s as simple as handing it back at the end of the contract rather than having to advertise or visit a dealer to trade-in and haggle over prices.
• Road tax, breakdown and MOTs are included: All new lease cars are covered by a manufacturer’s warranty (at least three years as standard) which means most mechanical faults will be fixed. Road tax, breakdown cover and MOT costs are included in your lease payments, too, meaning you’ll only have to worry about routine servicing and maintenance.
• No wear and tear to worry about: As your lease car will be new, there’s no need to be concerned about wear and tear, which can end up costing you thousands in repairs if you’re driving a used car. Electric cars have fewer moving parts than petrol or diesels, making them even cheaper to maintain.

Which car model is right for me?

You’re spoilt for choice when it comes to picking an electric car, with every manufacturer releasing new models all the time. There are family SUVs like the BMW iX, long-range cruisers like the Tesla Model 3, compact city cars like the Fiat 500 and even thrilling sportscars like the Porsche Taycan.

Each make and model offers its individual pros and cons depending on if you need to prioritise range, performance, practicality or comfort.

With that in mind, we know that choosing a model can often be overwhelming – but don’t worry, our handy electric car comparison tool can help you find your perfect car.

Who can take out a personal car lease?

Anybody who passes our credit checks has a valid UK driving licence and is at least 18 years old can take out a personal contract hire lease agreement. If you’ve got any questions, call us on 0333 1234 333 and one of our leasing consultants will be happy to help.

Why is personal leasing more expensive than business leasing?

Leasing a car for personal use is very similar to business car leasing but if you compare monthly payments you’ll find that they’re higher for personal leases. That’s because business leases don’t include VAT – it’s the same as if you’re buying materials or parts from a hardware store.

So, why can’t you just pick a business lease instead? In order to qualify, you’ll need to be a:

• Limited Company or Private Limited Company (PLC)
• Sole Trader
• Partnership
• Limited Liability Partnership (LLP)
• VAT-Registered company

If any of these apply to you then a business lease may be a cost-effective option for you. And the good news is you can still drive it for personal use if the number one use is business-related.

Step-by-step guide to personal leasing with GRIDSERVE

We aim to make leasing a new electric car as easy and straightforward as possible with a team of experts on hand to lead you through the process.

1. Find your ideal car: Do your research into what model you want: whether it’s a small city car or large family SUV. Do you need to prioritise range or space? You can use our EV comparison tool when you’ve narrowed it down to see what the perfect car is for you.
2. Choose the terms: You’ll need to budget to work out how much you can commit to paying each month. When you have a figure in mind, you can tailor your lease by selecting mileage limits (make sure you don’t underestimate this as if you go over you could end up paying excess fees at the end of a lease), choosing how long you want the car (normally 24, 36 or 48 months) and agreeing on an initial upfront payment.
3. Agree the lease: We work with a number of partners to organise your lease. You’ll receive a lease agreement with all the terms and conditions in place. If you’ve got any questions, you can speak to one of our team or your HCVS Sales Agent.
4. We process your order: Once you’ve dotted the Is and crossed the Ts it’s time to sign the contract on your lease. We have a long list of in-stock deals which means you could be in a new vehicle in a matter of weeks. If you go for a car that’s not currently in stock, we’ll process your order with the manufacturer to get the car made as quickly as possible.
5. A delivery date is confirmed: Once the car is ordered and being built, you’ll get a delivery date confirmed. Depending on your model and the factory schedule this could be anything between several weeks to several months.
6. The vehicle is delivered to your door: This is the fun bit… it’s time to drive your new car. We’ll deliver it to your door free of charge (on the UK mainland) and make sure you’re happy with everything during the handover. Once your lease comes to an end, you’ll be able to hand it back and start the process again on a new model.

Why choose GRIDSERVE for your personal EV leasing deal?

There are plenty of providers to choose from when it comes to leasing an electric car but there are a few things that make GRIDSERVE Car Leasing a little bit different. Here’s why you we think you should choose us:

• Plant power: We plant 100 trees for every new lease
• Fully charged: We’re experts in all things EV and you can combine your lease with charging on the GRIDSERVE Electric Highway – plus we can support with charging solutions, such as at a depot
• Expenses made easy: Charge regularly on the GRIDSERVE Electric Highway and you can sign up to our automated digital receipts service to get charging sessions sent direct to your inbox
• Sun-to-Wheel: Our industry-leading chargers are powered exclusively by net zero carbon energy – part of our sun-to-wheel ecosystem
• Help at hand: We’ll be there to support you throughout your lease with our exceptional customer support
• All inclusive: When you lease with us, we offer leasing contracts that include road tax, insurance and maintenance to take the stress out of running your car

What information do I need to provide when applying for a PCH lease?

Our leasing experts will help you along the leasing journey and do a lot of the heavy lifting but there’s a few documents we’ll need from you. These include:

• The usual personal details (name, date of birth, marital status etc.)
• Address details (usually to cover the last five years)
• Proof of address (a utility bill or bank statement showing where you live now)
• Employment details (if you’ve recently changed jobs, we’ll need evidence of previous roles)
• Bank statements (evidence of your income and outgoings to prove you can afford the lease)
• Bank details (this will help us set up the direct debit for the monthly payments)
• Photo ID (your driving licence or passport will normally be enough)

Do I have to maintain my personal lease car?

The simple answer is yes. Just because you don’t own the car and get to hand it back at the end of the agreement, doesn’t mean you don’t have to look after it.

At the end of the term, your car will be inspected. Some normal wear and tear is to be expected, but you’ll have to cover the cost of any bumps or scratches. Your car’s mileage will also be checked, to ensure you haven’t gone over the agreed annual amount. Exceeding your limits will incur fees.

During the lease we recommend that you stick to the manufacturer’s recommended service intervals, to ensure the car is in the best possible condition.

While any repairs will be covered under warranty, you’ll need to pay for servicing. When you take out your lease, you can pay for a maintenance plan for extra peace of mind. There’s no lump sum to pay, instead the cost will be added to monthly payments and spread across your lease. 

Can you lease a car with a poor credit score?

If you have a poor credit rating, you might find it difficult to get approved for credit and leasing a car through a leasing company. It’s best to check this early in the process to avoid disappointment later down the line.

At GRIDSERVE, we'll do everything we can to help you find a car that works for you.

Can I end the PCH leasing deal early?

The answer is yes, but it might be expensive. Each lender will have a specific policy on early termination, including the associated fees. It’s always best to check the specifics before you sign the contract.

If you think it’s likely that your circumstances will change in the short term then a lease is perhaps not right for you… or you could opt for a shorter two year deal rather than a longer four year lease to give you flexibility.

What happens at the end of the deal?

For most leases at the end of your agreement you hand the car back, settle any additional fees for damage or excess mileage and then look at starting a new lease. Some companies will offer the option to extend your contract, too. If you’ve taken out a Personal Contract Purchase (PCP) lease, then you have the option of paying a one-off “balloon payment” to keep the vehicle and become the owner.