Car leasing with insurance

Combining the cost of your car with insurance means you've only got one payment to make each month

BuyaCar team
May 30, 2020

Leasing - also known as Personal Contract Hire (PCH) - is a simple way of getting behind the wheel of a new car for a low monthly cost. For an initial payment and a series of fixed monthly payments, you rent the vehicle for an agreed term and then hand it back at the end, with no option to buy it.

In most cases you’ll need to arrange insurance for yourself, as few car lease deals include the cost of cover. However, there are ways of rolling the cost of your car and insurance into one monthly payment. Most of these schemes are based upon Personal Contract Purchase (PCP) finance contracts. These involve a deposit and a series of monthly payments - in a similar manner to leasing - but also give you the chance to buy the car at the end of the contract by making the optional final payment.

However, as with leasing, if you want to hand the keys back at the end of the contract with PCP, you can. Come to the end of the term and you can simply return the car with nothing more to pay, as long as you've stuck to the pre-agreed mileage limit and have kept the car in good condition - just like with a lease.

So, if you fancy financing a car with insurance included in one monthly payment and the option to return the car at the end, PCP finance could be the answer - though this normally limits you to financing a new car. If you're after the best value, though, consider financing a two or three-year old car instead and you may save enough in monthly payment terms to be able to cover your insurance premium - another way to get a car and insurance within your monthly budget.

Car leasing with insurance for used cars

Car leasing is most common for new cars, so it’s unlikely to be an option if you’re looking at a cheaper used car. Fear not, though. PCP finance is the most common way to pay for a new car, so there are plenty of good deals available. And there's no need to buy the car at the end, so you can have the same simplicity as with a lease.

Used cars are also available with PCP finance. Your PCP agreement can often be combined with a loan that covers the cost of insurance in the first year of owning the car. Monthly payments will then cover the cost of your finance and insurance, giving you time to save up for your insurance premium in the second year.

Car leasing with insurance for new cars

If you’re looking for a new car, there are several options that allow you to combine finance and insurance payments. One of the best-known formats is Just Add Fuel deals, pioneered by Peugeot and now offered by Citroen and DS under the name SimplyDrive.

One monthly payment covers the cost of finance, insurance, servicing, breakdown cover and tax. In most months, the only extra cost you’ll have is fuel - as the name suggests.

The majority of these schemes are based on PCP finance, so finance payments are kept low, and you’ll be able to return the car at the end. Many drivers do this and start another agreement, although there's also the option to buy your car for a lump sum, or by refinancing it.

There's also a similar setup on offer from Volvo, known as Care By Volvo. This is due to return in the near future after it was discontinued. This is a car leasing scheme that includes insurance, servicing and tax within a single monthly payment. As it's a leasing contract, however, there's no option to buy the car when the contract ends.

Free insurance offers

What could be an even better deal is getting car insurance thrown in with the finance deal, and that’s an option available on certain new cars. You’ll normally have to take out PCP finance rather than leasing the vehicle, but monthly payments are typically affordable.

This can represent an enormous saving - particularly for younger drivers whose monthly insurance payments can be more than their car payments. This also gives young people more time to save up for the cost of insurance, which you’ll be responsible for from the second year onwards.

Remember, though, that while car and insurance costs may be rolled into one monthly payment with these offers, going for a new car is likely to prove far more expensive than going for a two- or three-year old equivalent used model and paying for your insurance separately. So, if you want the best value rather than sheer simplicity, this could be the way to go.


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