What are the extra costs of leasing?

There are several factors which impact how much it costs to lease a car; the vehicle model, specification and optional extras, the length of your lease, and how many miles you expect to do for example. However, there are other costs involved in leasing, which you may not have considered. This guide looks at the potential extra charges above your monthly payments you might incur when leasing a car that are in addition to your monthly payments.

Initial rental

Leasing companies will require an initial rental when you agree to a contract. This initial payment can be equivalent to one, three, six, nine- or 12-monthly payments and is subtracted from the overall cost of the lease. You can choose how much your initial rental is, but it’s important to remember that the lower the amount you pay upfront, the higher your monthly payments will be.

Administration fees

The admin fees associated with leasing aren’t usually included in the cost of the car. These prices can vary between leasing companies, but they tend to be around £300. Taking someone through leasing a car is a lengthy process with a lot of paperwork and communication required. If a company claims they don’t charge admin fees, it’s likely that they have higher monthly payments to cover the cost.

Maintenance and servicing

Although you won’t have to worry about MOTs if your contract is for three years or less, you’ll still have to pay for servicing and maintenance. If you take out a four-year lease you will have one MOT to pay for. A service is a regular check of the vehicle and is carried out at intervals specified by the vehicle manufacturer. Some companies provide add-on maintenance packages as part of their lease contracts which can be added to your monthly payments.

Car insurance

Insuring your lease vehicle is your responsibility and leasing companies will stipulate that you take out fully comprehensive insurance cover. Comprehensive cover tends to be more expensive than third-party insurance and you’ll need to tell your insurer that you’re not the registered owner of the vehicle.
You may also want to take out gap insurance, which covers the difference between the value of the car and the amount you owe for the lease. The cost of insurance depends on the vehicle model, your driving history, your credit rating and how you’ll use the car.


Although it may seem obvious, many drivers don’t take into consideration fuel costs when thinking about how much their car costs each month. The cost of running your car isn’t included in your monthly leasing cost, meaning it’s your responsibility to make sure you have enough money each month to keep the tank full. The average price for fuel in the UK is around £1.31 for a litre of petrol and £1.35 for diesel, so costs can soon add up. It’s worth using a fuel cost calculator to work out what your average fuel costs could be for your chosen lease car.

To find out what your weekly, monthly and annual fuel cost charges are likely to be, try our Fuel cost calculator. Just select your vehicle, the average fuel price and estimated mileage to get your results.

Wear and tear

When you return the lease vehicle at the end of the agreement, it will be evaluated for any damage that falls outside of the BVRLA definition of ‘fair wear and tear’. ‘Fair wear and tear’ is the damage that occurs to a vehicle as a result of normal usage and such as minor surface damage or a slightly worn interior for example. It’s important that you take good care of the vehicle right from the start of the lease and assess it for damage at least three months before it’s due to be returned.

Excess mileage

When you lease a car, you agree to do a set amount of mileage each year. Your lease contract will specify a maximum mileage cap, usually between 5,000 and 20,000 miles per year. The annual mileage allowance allows the leasing company to estimate the resale value of the car once the lease period ends. The more the mileage allowance, the higher the cost and if you go over, you’ll be charged for every mile that exceeds the limit.

This charge can vary from a couple of pence to £1 per mile, depending on the vehicle model and leasing company policy. The leasing company will confirm their charges in your contract, but the average penalty is around 10p for every mile over the maximum mileage cap.


Most leasing prices quoted exclude VAT, which is charged at 20%. There’s usually an option to switch between business and personal leasing quotes. If you’re a business owner, you may be able to claim back the VAT on a car if it’s used for business purposes.

In Summary

Leasing a car can be an easy and low-cost way to drive, particularly if you’re looking for new or upmarket models. However, it’s important to ask the lease company about what costs are included in leasing a car to make sure you can manage the monthly payments.

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