What Is the 1.5% Rule When Leasing a Car?
If you are searching for a new car lease deal, you may have heard people mention the 1.5% rule. It is a quick way to estimate whether a lease offer provides reasonable value compared with the vehicle’s list price.
However, it is only a starting point. The initial rental, contract length, annual mileage and total amount payable must also be considered before deciding whether a deal really stacks up.
In this guide, National Vehicle Solutions explains how the 1.5% leasing rule works, how to calculate it and what else you should check before ordering your next vehicle.
What Does the 1.5% Rule Mean in Car Leasing?
The 1.5% rule suggests that a car lease could represent good value when the regular monthly rental is no more than 1.5% of the vehicle’s list price.
For example, if a new car has a list price of £40,000:
£40,000 × 1.5% = £600
Based on the 1.5% rule, a monthly rental of £600 or less could be considered reasonable.
If the rental is considerably below £600, the offer may represent particularly strong value. However, you still need to examine the entire lease agreement rather than relying on the headline payment alone.
How Do You Calculate the 1.5% Leasing Rule?
Use this simple calculation:
Monthly rental ÷ vehicle list price × 100
For example:
- Vehicle list price: £35,000
- Regular monthly rental: £420
- £420 ÷ £35,000 × 100 = 1.2%
The monthly rental is 1.2% of the vehicle’s list price, placing it below the 1.5% benchmark.
Here are some further examples:
| Vehicle list price | 1.5% monthly benchmark |
|---|---|
| £25,000 | £375 |
| £30,000 | £450 |
| £35,000 | £525 |
| £40,000 | £600 |
| £45,000 | £675 |
| £50,000 | £750 |
| £60,000 | £900 |
Is a Lease Below 1.5% Always a Good Deal?
No. The 1.5% rule is an informal rule of thumb, not an official industry standard or finance-company requirement.
It only compares the regular monthly rental with the vehicle’s list price. It does not automatically account for:
- The initial rental
- The length of the agreement
- The annual mileage allowance
- Processing or administration fees
- Maintenance costs
- Excess mileage charges
- Vehicle availability
- Optional equipment
- Whether VAT is included
- The total amount payable
A vehicle advertised at £299 per month with a 12-month initial rental could cost more overall than one advertised at £339 per month with a three-month initial rental.
Always compare like-for-like quotations before deciding which deal offers the best value.
Remember to Check the Initial Rental
The initial rental is the larger first payment made at the beginning of a lease agreement. It is normally shown as a multiple of the regular monthly rental.
Common payment profiles include:
- 1+35
- 3+35
- 6+35
- 9+35
- 12+35
A 9+35 agreement means that the initial rental is equal to nine monthly payments, followed by 35 regular monthly rentals.
The initial rental is not normally a refundable deposit and does not give you ownership of the vehicle. Increasing it usually reduces the regular monthly rental, but it does not necessarily make the overall agreement cheaper by the same amount.
If keeping the upfront payment as low as possible is important, explore our no-deposit car lease deals.
Despite the commonly used name, “no-deposit leasing” will usually involve a low initial rental—often equivalent to one monthly payment—rather than no upfront payment whatsoever. Always check the quotation for the precise amount and payment date.
Calculate the Average Monthly Cost
A better comparison can be made by calculating the average monthly cost across the entire lease agreement.
For a 3+35 lease at £300 per month:
- Initial rental: 3 × £300 = £900
- Remaining rentals: 35 × £300 = £10,500
- Total rentals: £11,400
- Average over 36 months: £316.67 per month
You should then add any compulsory processing fee or additional charge.
This gives you a more realistic comparison figure than the £300 headline rental on its own.
What Percentage Represents a Good Car Lease Deal?
As a broad guide:
| Monthly rental as a percentage of list price | General indication |
|---|---|
| Below 1% | Potentially exceptional value |
| 1% to 1.25% | Potentially very strong value |
| 1.25% to 1.5% | Potentially good value |
| Above 1.5% | Examine the overall contract carefully |
These percentages are only general indicators. A vehicle that exceeds 1.5% could still be the right choice if it includes a low initial rental, a high annual mileage allowance, quick delivery or the exact specification you require.
Why Do Some Cars Lease Better Than Others?
A vehicle’s list price is only one part of the leasing calculation.
Monthly rentals can also be affected by:
- The vehicle’s predicted value at the end of the contract
- Manufacturer and dealership support
- Finance-company campaigns
- Current stock availability
- Demand for the model
- Annual mileage
- Contract length
- Model changes
- Optional equipment
- Expected depreciation
This explains why a more expensive vehicle can occasionally cost less per month than a cheaper alternative.
A car with strong predicted resale value or significant manufacturer support may produce a much more attractive lease rental.
Does the 1.5% Rule Work for Electric Cars?
The calculation can also be used when comparing electric car lease offers.
Electric vehicle pricing can be heavily influenced by manufacturer discounts, finance-company support, stock levels and predicted future values. This means selected EVs can sometimes offer excellent value compared with their list prices.
However, the monthly rental is not the only figure to consider. You should also think about:
- The vehicle’s usable battery capacity
- Official and real-world driving range
- Home-charging arrangements
- Public charging costs
- Charging speed
- Insurance
- Your regular mileage and journey pattern
Explore the latest electric car lease deals available through National Vehicle Solutions.
Personal Car Leasing and the 1.5% Rule
Personal Contract Hire allows an individual to drive a new vehicle for a fixed period and agreed annual mileage.
You pay an initial rental followed by fixed monthly rentals. At the end of the agreement, you return the vehicle, subject to its mileage and condition.
When comparing personal car lease deals, make sure all prices include VAT and that each quotation uses the same:
- Initial rental
- Contract length
- Annual mileage
- Maintenance arrangement
Personal leasing can suit drivers who want predictable monthly payments and access to a new vehicle without taking on the risks associated with future resale values.
Business Car Leasing and the 1.5% Rule
Business Contract Hire is designed for eligible companies, partnerships and sole traders.
Business lease rentals are commonly advertised excluding VAT, so you must make sure you are comparing the correct figures. The vehicle list price and monthly rental should be compared on a consistent VAT basis.
Our business car lease deals can help companies access new vehicles with fixed monthly rentals and clearly defined contract terms.
Tax treatment depends on the business and how the vehicle is used. Speak to a qualified accountant or tax adviser if you need guidance relating to your circumstances.
Should You Choose a Vehicle Based Only on the 1.5% Rule?
No. A strong percentage does not automatically mean that a particular vehicle is right for you.
Before ordering, consider whether the car provides:
- Enough passenger and luggage space
- The right petrol, diesel, hybrid or electric powertrain
- Suitable comfort and performance
- Affordable insurance
- The equipment you need
- An appropriate annual mileage allowance
- A monthly rental you can comfortably afford
A lease deal should meet your practical needs and budget. There is little benefit in securing a low percentage on a vehicle that does not work for your everyday driving.
Frequently Asked Questions
No. It is an informal rule of thumb used to make an initial assessment of a lease deal. Finance companies do not use it to decide whether your application will be accepted.
For a personal lease, compare the list price and monthly rental on a VAT-inclusive basis. Business lease rentals are often advertised excluding VAT, so always check the figures before comparing offers.
Yes. The initial rental forms part of the total contract cost. A low headline rental supported by a large initial payment can make a deal look better than it really is.
Not automatically. The 1% offer could have a larger initial rental, lower mileage allowance, longer contract or additional fees. Compare like for like and calculate the total payable.
With Personal Contract Hire or Business Contract Hire, you return the vehicle at the end of the agreement. There is usually no option to purchase it.
You will normally be charged for every mile above the agreed contract allowance. The excess mileage rate should be shown in your lease quotation and agreement.
Many lease agreements offer an optional maintenance package covering scheduled servicing and certain replacement items. Check exactly what the package includes before adding it.
Find a Car Lease Deal That Stacks Up
The 1.5% rule is a helpful way to shortlist lease offers, but it should never replace a proper comparison of the full contract.
At National Vehicle Solutions, we make vehicle leasing simple. We can help you compare the initial rental, monthly payments, annual mileage, contract length and total cost so you know exactly what you are committing to.
Browse our latest vehicle leasing deals online or call our team on 0191 250 4265 for a personalised quotation.
Vehicle Leasing Made Simple.
Vehicle leasing is subject to status, availability and finance-company approval. Excess mileage and damage charges may apply when the vehicle is returned. Vehicles must be maintained in accordance with the manufacturer’s requirements and returned in a condition consistent with the applicable fair wear and tear guidelines. Ending a lease early may result in significant early-termination charges.