Hybrid car lease: car leasing vs PCP
Could leasing be the best option for you? We look at whether leasing is the best way to buy a hybrid car
Like all cars, there are many paths to hybrid ownership. Of course, you can buy your electric, hybrid or plug-in hybrid (PHEV) directly from a dealership or even online – a possibility many brands are now offering. Some may choose to pay for it using a personal contract purchase (PCP) plan, but leasing – also known as a personal contract hire (PCH) – is another viable option.
What is leasing?
Leasing a vehicle used to be associated with company cars and business use, but an increasing number of private buyers are turning to leasing brokers. The process to lease a hybrid or electric car is broadly the same as a PCP deal, although there are differences to be aware of before you decide which is best for you.
A lease deal consists of a set number of monthly payments, plus an initial rental that’s equivalent to a few months’ payments. Say you leased a car for £300 per month with six months’ initial rental, the first payment you’d have to make would be £1,800. The payment setup is just like a PCP deal, where you have an initial deposit followed by an agreed monthly repayment schedule.
You don’t ever own the car you’re leasing – it’s always the property of the finance company. That’s actually the case in a PCP deal as well, but a PCP deal offers you the chance to buy the car at the end of the agreement. On a lease, you simply hand it back at the end of your term and start again. This works well for someone who wants or needs to change their car regularly, as there's nothing to pay off or tie you in when the arrangements end – except any excess mileage or damage charges you’ve accrued.
At the moment, with the current shortage of new cars, many leasing companies are offering the option of extending leases, usually with the same monthly payments. But make sure to check the warranty of the car you’re driving; if your leased car goes out of warranty and needs fixing, you’ll have to pay out for a car that you don’t own.
Leasing versus PCP and HP
PCH lease deals have become popular because they tend to offer lower monthly payments than PCP or HP (Hire Purchase) finance deals – or similar monthly payments but with a lower initial payment.
Furthermore, lease customers often won’t need to worry about tax or warranties – as these can be included or worked into the cost. Servicing and maintenance may not be included, however. The disadvantage is that once you’ve signed on the dotted line, there’s very little flexibility with a lease deal. If your circumstances change – if you can no longer afford the repayments or need a larger car, for example – it’s often not possible to end the agreement.
As such, leasing companies almost always demand a good credit score to ensure you’ll be able to meet the required payments for the duration of the loan. Of course you can still get a car even with a bad credit score, but there a lot of pitfalls to getting a subprime loan which you need to look out for.
Excess mileage and damage charges are common, too, so be careful to make sure you factor this in when negotiating a new lease deal. There are benefits to leasing your next hybrid or electric car, of course, of which we’ll go into more detail below.
What are the benefits of leasing a hybrid car?
The benefits of leasing a hybrid car are identical to those associated with leasing a petrol, diesel or electric model. Normally only offered on new cars, a lease is more like a long-term rental than a purchase agreement – in effect, you're making monthly payments to use the car, before handing it back at the end of the term.
The main advantage is those lower monthly payments. You, as the customer, will have no tangible asset at the end of the agreement – the car remains the property of the leasing company at all times. This means, while there’s no ‘balloon’ payment and you’ll have nothing to pay at the end, you’ve also nothing to trade in against your next car.
Another benefit of leasing a hybrid or plug-in hybrid car is that you’ll do a decent job of avoiding any significant hybrid car tax hikes that the government may make over the next five to 10 years. The comfort of knowing you’ll hand the car back at the end of the agreement means that if ministers decide to target petrol, diesel or hybrid drivers in the push towards a fully electric future, the chance of you being hit with a big bill is limited.
Do hybrid cars cost more to insure?
Unfortunately, some hybrid cars do cost more to insure than their petrol or diesel equivalents. This is largely due to projected repair costs in the event of a crash; relatively new technology, along with all the sensors and assistance systems found on many current hybrid and plug-in hybrid models, means that premiums can turn out slightly higher. As more and more manufacturers launch hybrid vehicles, however, insurance costs are expected to fall.
What are the best hybrid cars to lease?
This is a fairly open-ended question, and it depends on the kind of car you’re after. Most segments of the new-car market offer a wide range of hybrid and plug-in hybrid models, reviews of which can be found across this website.
If you’re after a car that's particularly easy and satisfying to run, then those listed in the latest Driver Power survey are worth considering. Hybrid cars fared well in the 2020 rundown – with seven of the top 10 models available with either a hybrid or plug-in hybrid powertrain.
What hybrid car lease companies are there?
There are loads of companies that will lease you a new hybrid car. The word ‘new’ is important; lease deals are rarely offered on used cars. Leasing.com offers particularly competitive deals; at the time of writing it had over 300,000 plug-in hybrid (PHEV) lease deals, and an additional 196,000 hybrid offers. You can search by monthly budget or by in-stock cars, too.
How much would it cost to lease a hybrid car?
You’ll currently pay from around £300 per month for a Kia Niro PHEV 2 on leasing.com – with an initial rental payment of only £2,710. While leasing.com lists this deal and many others, the supplier may be a different finance company – in this case you’ll be dealing with a firm called Best Car Finder. On similar terms on Kia’s PCP finance calculator, the monthly payment works out at £472.
Again, on leasing.com hybrids start from around £195 for a Hyundai Kona Hybrid. Cheaper models are available, but beware, as many of them are ‘mild hybrids’ with little more than a small belt-driven starter generator designed to reduce strain on the engine. These offer only a small improvement in average fuel economy, and rarely any opportunity for pure-electric running.
As with any type of car, the sky’s the limit with regards to how much you can spend; leasing.com has top-spec plug-in hybrid Range Rover models listed for several thousand pounds per month. If you’re looking at this kind of car, a PCP deal may make more financial sense. Check out our electric-car deals page for the latest leasing offers.
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