How to Calculate Car Lease Costs
Funders set lease prices using their own rate books, so you cannot work out an exact figure with a simple formula. What you can do is understand the factors that drive the price, so you know what to change to get the monthly rental you want.
What goes into a monthly rental
Broadly, a contract hire rental pays for the part of the car's value that you use, plus the cost of the finance:
- The price of the car. The cash price, including the options you choose, is the starting point. A dearer car costs more to lease.
- Its expected value at the end. The funder estimates what the car will be worth when you hand it back. This is called the residual value. The more value the car keeps, the less you pay for the loss in between.
- The cost of finance. The funder charges for the money tied up in the car over the term, and this is built into the rental.
- The term. The length of the agreement spreads the cost over more or fewer months.
- Your annual mileage. More miles mean a lower expected value at the end, so a higher rental.
Put simply, you pay for how much value the car is expected to lose while you have it, plus the finance charge, spread over the months of your agreement.
Advance rentals
The initial rental is a number of monthly payments paid up front. On our deals you can choose 1, 3, 6, 9 or 12. The more you pay at the start, the lower the monthly rental, because less remains to be spread over the rest of the term. Paying less at the start does the opposite.
To compare two quotes, add the initial rental to the monthly rentals across the whole term. A lower monthly rental with a large initial rental is not necessarily cheaper overall. Our guide to no deposit car leasing goes into this in more detail.
Mileage
Choose the mileage you will really drive. Too low, and you pay a charge for each extra mile when the car goes back. Too high, and you pay more every month for miles you never use. Look at your last year's driving, then add a small margin.
Term
The monthly rental differs between a 24-month and a 36-month agreement. Longer is not always cheaper per month, so compare both for the car you want. Our shortest term is 24 months.
VAT
Our prices can be viewed ex VAT or inc VAT. A VAT-registered business can usually reclaim 50% of the VAT on car rentals where the car has any private use, so the real cost can be lower. Check the detail with your accountant.
Use the configurator
The simplest way to find your price is to use the configurator on each deal page. Pick the car and the variant, then set:
- The term, 24 or 36 months.
- The advance rentals, from 1 to 12.
- The annual mileage.
The monthly rental and the initial rental update as you change each setting. Switch between ex VAT and inc VAT to see both. Prices start on 24 months, 5,000 miles a year and 9 initial rentals, so change those to match how you will use the car.
Compare properly
Change one setting at a time to see its effect. Then compare quotes on the same term, mileage and initial rentals. If they differ, add up the total cost across the term.
Browse the latest deals to try the configurator, or see our car leasing page for the basics. For the wider question of whether to lease at all, read is car leasing worth it for businesses.
Swiss Vans Ltd is authorised and regulated by the Financial Conduct Authority as a credit broker, not a lender. FRN 668283.