Leasing explained:

The only money that is required up front is your first payment (usually equal to three monthly payments). Lease payments are cheaper than a loan purchase because the charges are based on different values.

With a lease the car’s final value – what it is worth for re-sale at the end of the agreement – will be taken into account.

You will never actually own the vehicle – the lease company will – which means that if you default on payments you will lose the car, whatever other financial penalties may be imposed.

In effect you hire the vehicle for an agreed period of time and pay a fixed sum for the privilege. The fixed sum will take into account the average mileage you are likely to do. The higher the mileage, the higher the payment, because the more miles on the clock the less the car will be worth when the lease company comes to sell it. And of course if you exceed the agreed mileage, you will face further charges.

The lease can be just for the car, or can include servicing, but again at an increased cost.

Terms usually range from 18 months to five years, and when the lease ends you simply return the car, settle the contract and walk away.

Don’t be tempted to lease a car with the eventual intention of buying it: that is a very expensive way of doing things.