Leasing vs Buying a Car
Should I buy or lease a new car? A tricky question many people ask themselves when wanting a fresh set of wheels and it can be a very tough choice.
Data from the British Vehicle Renting and Leasing Association (BVRLA) suggest more than 1.3 million vehicles on UK roads are currently leased, showing it to be a popular option for many. But what about yourself?
We want you to be able to make your own informed decision as to which route to go down for your new car, whether that be a lease or buying outright.
So what is the difference between a lease and purchasing outright?
Personal Contract Hire (PCH) is the most popular way of leasing a car, it includes paying a small deposit and then paying a monthly fee for the agreed rental term which is typically over 2 or 3 years but this can vary. At the end of the term you will need to hand the car back to the dealer.
Buying a car outright you do have various routes to go down.
- Cash outright meaning you have no monthly payments, you just have to be mindful of other ownership costs as with any car.
- Bank loans can be used to pay the full cost of the car, you will need approval for a bank loan and good credit history. Repayments are made to the bank directly.
- Hire Purchase (HP) is a type of finance that spreads the full cost of the car across set monthly payments over an agreed term. At the end of the agreement you usually pay a very small fee to take ownership of the car.
- Personal Contract Purchase (PCP) is another type of finance where you pay a deposit at the start of the agreement then monthly payments as agreed, however at the end of the agreement you have the option to pay a large balloon payment or you can hand the car back for a newer model or something completely different!
Advantages of leasing:
Highly affordable way to drive a new car!
New cars can be extremely expensive and leasing often allows you to drive a better car than you’d expect due to the monthly cost being fixed so you know exactly what you’ll be paying each month.
You get to avoid the cost of an ageing car!
New cars are at peak reliability with no hidden issues. Used cars often come with hidden issues that could cost you lots of money over time. With a leased new car, you don’t have to worry about depreciation or any issues that you would if you had to sell on.
You get tax, breakdown cover and more included!
The cost of road tax and breakdown cover is all included in your monthly payments, while your MOT and servicing can be added at an extra cost.
You also don’t have to worry the cost of an MOT!
Cars don't need an MOT until they're three years old, so if your leasing deal is shorter than that, you may never have to pay for an MOT again.
Tax benefits of businesses
Business leasing customers can take advantage of huge tax benefits, claiming back up to 50% of VAT on a car or up to 100% of VAT on commercial vehicles.
Disadvantages of leasing:
You do not own the vehicle
The vehicle would need to be returned at the end of the lease period.
Wear and tear is your responsibility
Stains on seats, curbed alloys and other damages must be fixed by the person leasing the vehicle to avoid extra charges.
Poor credit history could mean you don’t get approved
Monthly payments are the same each month so if your wage is flexible, it might not work for you.
Mileage matters
If you exceed the mileage set on your leasing contract, excess charges will be added.
Why might it be better to buy a car?
You will own the vehicle
This means you can modify the car and also keep any potential profits when it comes to sell.
You can sell it whenever you like
You have the ability to swap and change your car as and when you please as there is no contract.
Mileage is unlimited
Charges for extra miles do not apply when you own the vehicle which can be a bonus for those who travel large distances each year however, mileage is still something you need to think about for insurance purposes.
What are the disadvantages to buying a car?
Cars depreciate
Cars will always fluctuate in price, with ownership comes the knowledge that you’re unlikely to make back the money you purchase it for.
Costs can be higher
Paying for a new car costs more than a lease would over time, this is excluding the cost of road tax and breakdown cover which is separate when you own the car and as the car gets older the costs will inevitably rise.
Selling isn’t always simple
Companies will often help with selling the car however they’ll take a chunk of the price leaving you without your car and without as much money in your pocket.
If you've decided that leasing a car is a good idea, make the most of all our latest car leasing deals and get your brand new vehicle delivered to your door.