What's Included in Your Monthly Lease Payment?

Your monthly lease payment funds the gap between what the vehicle costs to acquire and what it's forecast to be worth at the end of the term, plus interest charges. Wrapped into that figure you also get road tax for the contract, delivery to your door, and the manufacturer's warranty. Insurance, fuel and servicing sit outside it.

What is actually in your monthly lease payment?

Your monthly rental covers the gap between what the vehicle costs to acquire and what it's forecast to be worth when you hand it back, plus interest charges on the vehicle the funder has bought. Road tax and delivery are built in. It isn't the price of the car divided by 36.

That distinction matters more than it sounds. The funder buys the vehicle outright and their money stays tied up in it for the whole contract, so interest is charged on the vehicle - not just on the gap you're funding. On a keenly priced car, interest can be the larger of the two halves. Anyone who tells you a lease means "you only pay for the depreciation" is giving you a half-answer.

The other thing you're buying, and it rarely appears as a line on the quote, is certainty. If the car is worth less at handback than the funder forecast, that's their loss. Return it within your agreed mileage and in fair condition and you owe nothing further.

What's included as standard in a lease rental?

On a standard Contract Hire agreement - Personal Contract Hire (PCH) for individuals, Business Contract Hire (BCH) for companies - your monthly payment normally includes road tax for the full contract term, free delivery to a mainland UK address, and the manufacturer's warranty, because the vehicle is new throughout your lease.

Road tax for the length of the contract

The funder is the registered keeper, so the funder taxes the vehicle and keeps it taxed. According to the BVRLA's consumer guidance, road tax is included in the monthly cost on a PCH contract - which is different from Personal Contract Purchase (PCP), where the first year is usually covered and you take over from then on.

One wrinkle worth knowing: rentals are priced against the Vehicle Excise Duty (VED) rates in force when the contract starts. If the Government raises VED mid-contract, many agreements let the funder recover the difference. For the 2026/27 tax year the standard VED rate is £200 a year, with an expensive car supplement of £440 a year in years two to six for cars with a list price above £40,000 (above £50,000 for zero-emission cars), per the GOV.UK vehicle tax rate tables. On a lease that supplement is the funder's bill, not yours - which is quietly one of the better reasons to lease a car over £40,000. Our guide on whether road tax is included in a lease goes into the detail.

Delivery and the manufacturer's warranty

Delivery to a mainland UK address is standard on the deals we arrange, and the vehicle arrives taxed, registered and pre-delivery inspected. The manufacturer's warranty runs alongside your lease - on a typical three-year contract the car stays inside warranty throughout, so mechanical failures are the manufacturer's problem. A warranty isn't a maintenance package, though. It covers unexpected failures, not servicing, tyres or brake pads.

What isn't included in your monthly payment?

Insurance, fuel or electricity, servicing, tyres, consumables and any MOT that falls due are not in the standard monthly rental. Nor are excess mileage charges, damage beyond fair wear and tear, or early termination costs - those only arise if something changes. Budget for the running costs separately.

Insurance is the one that catches people out most often. You can't take delivery without fully comprehensive cover in place on the day, and the funder will expect you to be the policyholder or a named driver. Sort it a few days ahead - not the morning the transporter arrives.

Then there's mileage. Your rental is priced against the annual mileage you choose at the outset, so understating it to shave a few pounds off the monthly figure is usually a false economy. Our guides on how lease mileage works and excess mileage charges explain how to set it realistically.

Should you add a maintenance package to your rental?

A maintenance package folds servicing, replacement tyres, brake pads, wipers and other consumables into a single fixed monthly figure, added to your rental. It's optional, it has to be added before the contract starts, and it can't be bolted on halfway through. Whether it's worth it comes down to mileage and appetite for surprise bills.

Electric cars are the interesting case. Servicing schedules are lighter, but tyres tend to wear faster because the cars are heavier and torque arrives instantly - and tyres are the single biggest consumable on most maintenance packages. Ask for the maintained and non-maintained rentals side by side and judge the difference against what you'd realistically spend.

How the initial rental, term and mileage shape the monthly figure

Three levers move the monthly payment: how much you pay upfront (the initial rental), how long the contract runs, and how many miles a year you contract for. A larger initial rental doesn't reduce the total cost of the lease by much - it moves money out of the monthly figure and into month one.

Lease deals are quoted as a profile such as 9+35: nine months' rental as an initial payment, then 35 monthly payments, 36 months in total. That initial rental is not a deposit. It's the first chunk of your rentals paid in advance and it's never refunded. If you'd rather keep cash in your pocket, lower profiles exist - see what an initial rental really is and whether a no-deposit lease is possible.

So which combination should you pick? Work backwards from what you can genuinely afford every month, not from the headline figure. Our guide on how to budget for a car lease sets out a sensible method, and the fees to expect covers anything payable outside the rental itself.

Does the monthly payment include VAT and company car tax?

Personal Contract Hire rentals are advertised including VAT - the price you see is the price that leaves your account. Business Contract Hire rentals are advertised excluding VAT, because a VAT-registered business reclaims part of it. Company car tax is separate again and is never part of the rental.

How VAT works on a business lease

A VAT-registered business can normally reclaim 50% of the VAT on the finance element of a car rental, and 100% of the VAT on the maintenance element where it is invoiced separately. Commercial vehicles are treated differently and often allow full recovery. Speak to your accountant - your VAT position and how the vehicle is used both matter. Our business leasing pages set out the product options.

Company car tax sits outside the rental

If the vehicle is provided by your employer, you'll pay Benefit in Kind (BIK) tax - a tax on the value of a non-cash benefit - through PAYE. It's calculated on the car's P11D value multiplied by an appropriate percentage set by HMRC according to CO2 emissions, then by your income tax rate. For the 2026/27 tax year, HMRC's published rate for fully electric cars is 4%. Petrol and diesel cars scale with emissions across a much wider range of roughly 15% to 37% of list price, with higher-emission models sitting at the top end.

Example, illustrative only: a £40,000 electric car at the 4% rate for 2026/27 gives a taxable benefit of £1,600 a year. A 40% taxpayer would pay £640 a year in BIK - around £53 a month. You can check any specific vehicle using HMRC's company car tax calculator.

That gap between EV and combustion rates is why salary sacrifice has become such a common route to an electric car lease: you give up gross salary for the car, so the saving comes from income tax and National Insurance on the sacrificed amount, offset by a small BIK charge.

Is your monthly payment good value? A test you can run yourself

Divide the car's list price by the monthly rental. The answer tells you how many monthly payments fit into the price of the car, and higher is better. A score of 90 or more is strong value, 80 to under 90 is reasonable, and under 80 is poor - keep looking. It works on any deal, ours or anyone else's.

Assume the standard 9+35 profile unless a deal says otherwise. Example: a car with a £30,000 list price at £320 a month gives 30,000 ÷ 320 = 93.75. That's 90 or more, so it's strong value on this test.

Internationally, consumers use a "1% rule" - a monthly payment at or below 1% of list price marks a strong deal. It's the same test inverted, so a score of 100 is exactly the 1% rule. It's an informal consumer rule of thumb rather than an industry standard, and the same like-for-like caveat applies.

So what do you do with the score?

• 90 or more: strong value. Check the mileage and term suit you, then move - the sharpest deals sit on vehicles bought in depth and they don't sit around.
• 80 to under 90: reasonable. Worth taking if the car is exactly what you want, but run the same test on two or three alternatives in the same class before you commit.
• Under 80: poor value. Keep looking. Either the model is in short supply or it's simply not one where the discounts are, and something comparable will usually score far better.

In our experience the biggest single saving most customers make isn't negotiating - it's loosening their grip on one specific model. Decide what you need from a car and what you can spend, then look at what represents the best value inside that. The special offers are where the strongest numbers sit, because that's where volume has been committed.

Checklist: what to confirm before you sign

Before you commit, get straight answers on these seven points. Every one of them affects what you pay, either monthly or at the end. Any decent broker will answer all of them without hesitating - if you're getting vague responses, that tells you something.

• Is road tax included for the full term? It should be on Contract Hire. Check the paperwork matches the quote.
• What's the exact payment profile? Confirm the initial rental in months and pounds, and when it's collected.
• What's the contracted annual mileage and the excess mileage rate? The rate is quoted in pence per mile in your agreement.
• Is maintenance included or optional? If optional, ask for both rentals so you can compare.
• Are there any fees outside the rental? Get them in writing before you order.
• What's the handback standard? Under BVRLA fair wear and tear standards, normal use over the term is expected; kerbed alloys, unrepaired dents and worn tyres typically get recharged.
• How is early termination calculated? Contract Hire is priced on you completing the term, so ending it early is expensive. Know the number before you need it.

Frequently Asked Questions

Written by the team at First Vehicle Leasing, a UK vehicle leasing broker with over 25 years' experience arranging personal and business contract hire. FVL is authorised and regulated by the Financial Conduct Authority and is a member of the BVRLA. Our guides are reviewed and updated as rates and regulations change.