What leasing actually involves

Personal contract hire — usually just called leasing — works like this: you pay an initial rental, then a fixed monthly amount for an agreed term, typically two, three or four years. At the end you hand the car back and walk away. You never own it, and there is no balloon payment to settle or part-exchange to negotiate.

Because you are only funding the car's expected depreciation over your term rather than its full purchase price, monthly costs are often noticeably lower than a comparable hire purchase deal. You are effectively renting the car for its best years, when running costs are at their lowest and warranty cover is intact.

Do not confuse this with personal contract purchase (PCP), where you can pay a large optional final payment and keep the car. PCP is about ownership with a decision at the end. Leasing is about straightforward, predictable use. If you like changing cars every few years and dislike the faff of selling, leasing usually wins.

Why electric cars suit a lease particularly well

Electric vehicles are moving fast. A model launched three years ago may have been overtaken on range, charging speed and software by something newer and cheaper. Leasing neatly sidesteps that problem: you are not left holding an asset whose technology has aged.

There are other practical advantages worth knowing:

• Lower servicing costs. No oil changes, no clutch, no exhaust, and far fewer moving parts. Many EV leases include a maintenance package that covers routine servicing, and it often costs less than the equivalent for a petrol car.
• Warranty cover on the battery. Most manufacturers guarantee the drive battery for around eight years or 100,000 miles, which comfortably covers a typical lease term.
• Low company car tax. If you lease through a business or a salary sacrifice scheme, pure electric cars attract benefit-in-kind rates in the low single digits — currently as low as 2% — though these are scheduled to rise gradually in the coming years.
• Predictable costs. Your monthly payment is fixed, so rising fuel prices and interest rate changes do not touch it.

Mileage limits: the detail that catches people out

Every lease sets an annual mileage allowance: commonly 8,000, 10,000 or 15,000 miles. This is not a trivial box to tick. Choose too low and you will pay an excess mileage charge for every mile over the limit, typically somewhere between 6p and 15p per mile plus VAT. On a 36-month lease, being 6,000 miles over could add several hundred pounds to your final bill.

Choosing too high is less painful but still wasteful — you pay for miles you never use through a slightly higher monthly rental. Be honest about your driving. Electric cars are easy and cheap to drive, and there is a well-documented tendency for EV owners to rack up more miles than they did in a petrol car, simply because short trips feel free. Add a buffer of 1,000 to 2,000 miles a year if you are unsure.

Ask too whether unused miles can be carried between years of the contract. Some funders allow it; others do not.

Wear and tear, battery health and handing the car back

At the end of the lease the car is assessed against recognised fair wear and tear standards. Scuffs and stone chips are expected. Cracked bumpers, kerbed alloys beyond a light graze, bald tyres and unrepaired dents are not, and you will be charged for putting them right.

A few EV-specific points deserve attention:

• Return the charging cables. Both the home charging cable and any mode 3 cable supplied with the car must go back with it. Replacements are expensive.
• Check the charging port. Bent pins or a cracked surround caused by a clumsy plug-in are chargeable.
• Battery state of health. Most funders accept normal degradation. Rapid charging every day and repeatedly running the battery to zero will not do you any favours if a report is requested.
• Tyre tread and brand. Budget tyres fitted to an EV can affect range and may breach the terms of your agreement.

Before collection, clean the car inside and out and gather the service history, spare key and any documentation. A well-presented car invites a more generous assessment.

Questions to ask before you sign

Leasing rewards a bit of homework. Run through this list before committing:

• What is the excess mileage rate, and is it charged per mile or as a lump sum?
• Is maintenance included, and does it cover tyres?
• What happens if I want to end the lease early? Early termination charges can be substantial.
• Can I add a home charger to the deal, or is there a grant available for my circumstances?
• Is insurance likely to be more expensive than for a petrol equivalent? It often is.
• What is the process if the car needs warranty work?

Making the numbers work for you

A large initial rental lowers the monthly payment, but it also increases your risk if the car is written off early. Many drivers find three to six months' initial rental a sensible middle ground.

Factor in the whole picture: charging costs, insurance, any home wallbox installation, and the maintenance package. Charging overnight on a cheap off-peak tariff can bring running costs down to a couple of pence per mile, which is where electric leasing really starts to look attractive. Get the mileage right, look after the car, and leasing an EV can be one of the most cost-effective ways to drive electric.