Car leasing with insurance

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 effectively rent the vehicle for an agreed period 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.

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 with no damage beyond fair wear and tear - exactly like with a lease. You are likely to incur charges with both if you have exceeded the limit or caused any excessive damage, though.

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, not a used car. If you're after the best value, though, consider financing a two- or three-year-old car instead and you may save more than 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 typically only available on new cars and even then, you can't normally roll the cost of insurance into the lease cost. Fear not, though. Instead of second-hand car leasing, PCP finance is a popular way to pay for a used car, and there are plenty of good deals available. With PCP there's no need to buy the car at the end, either, so you can have the same simplicity as with a lease.

PCP finance can often be combined with a loan that covers the cost of insurance in the first year of running 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, pioneered by Peugeot. Citroen and DS previously offered a similar scheme under the SimplyDrive name, but this has been axed, at least for the time being.

One monthly payment with Peugeot typically 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. Yes, having all these costs bundled into one means that the monthly payment is generally higher, but you do have the simplicity of knowing what's coming out of your account each month.

The majority of these schemes are based on PCP finance, so monthly payments are kept low compared with Hire Purchase and traditional loans, and you’ll be able to return the car at the end. Many drivers do this and then step into another contract, although there's also the option to buy the car for a pre-agreed lump sum, or by refinancing it.

Volkswagen and Skoda with their electric cars, and Volvo with its entire range, offer payment plans that include many of the costs incurred by car ownership, including servicing and maintenance. While these don't include insurance, they help amalgamate the other costs to make budgeting easier.

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 similarly 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. There are often minimum and maximum age limits with free insurance offers, though, so it's worth checking the specific terms and conditions to understand which deals are available to you.

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 an 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.

*Representative PCP finance - Ford Fiesta:

48 monthly payments of £192
Deposit: £0
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.