Is It Better To Lease Or Buy A Car?
If you like the idea of getting behind the wheel of a brand new care every few years, there are a number of attractive and increasingly flexible options available, including the choice to lease or buy a car. So, is it better to lease or buy a car?
If owning a new car is important, paying cash and buying the vehicle outright is one option, though not many of us are in the fortunate position of being able to afford this.
Traditional finance routes, such as Hire Purchase and personal loans, do make purchasing a car a little easier by spreading the cost over a number of years. Yet these can still seem expensive.
Perhaps this explains why newer finance deals, such as Personal Contract Purchase agreements (PCP) are becoming popular. By only financing a proportion of the car’s asking price (usually the amount forecast to depreciate during the length of your agreement), these PCP deals help to keep the monthly payments low. However, at the end of these agreements, you’ll still have to find a large chunk of cash to own the car.
An affordable and flexible alternative
If owning the car isn’t your priority there is another alternative. Leasing a new car, also known as Personal Contract Hire (PCH) is becoming an increasingly widespread and convenient way to enjoy the benefits of driving a brand new car.
As ownership of the car remains with the leasing company, you’ll only ever pay to ‘use’ the vehicle. This makes your monthly payments seem much more affordable. Include a road tax and maintenance package as part of your monthly fee and leasing certainly starts to look very attractive. However, is it really such a workable option for today’s savvy road users?
To address this, we’ve taken a close look at the question, ‘is it better to lease or buy a car’ and shared our findings below.
What are the Pros and Cons of leasing a car?
As you’d expect, when it comes to the lease vs buy conundrum, there are benefits and drawbacks to owning a car and leasing a car. Whether one outweighs the other depends on a number of key factors. These include your lifestyle, your needs, your finances and of course, your personal preferences and priorities.
The benefits of owning car are well known and quite straightforward. Once you’ve paid for it and own it, the car is yours to do with as you wish. You can upgrade it or modify it, adding after-market extras to suit you and your tastes.
However, most cars depreciate in value over time and as your car gets older, it becomes more prone to wear and tear which means keeping it on the road can increase. So is car leasing a good idea?
Leasing a car is an entirely different proposition. As you won’t own the vehicle, most of the pros or the cons associated with owning a car don’t apply. Instead, there are an entirely different group of benefits to consider. To help make this clear, we’ve listed the pros and cons of leasing a car below.
- Small deposit – usually the equivalent of only three monthly payments
- More affordable – you’re only paying to use the car, so your payments can be lower
- Fixed payments – you know how much it will cost every month, helping you budget
- Low maintenance – these costs, including replacement tyres, can be included
- No depreciation – you’re not the owner, so worries about the value don’t apply to you
- Better car – lower ‘rental’ costs make it easier to drive a more upmarket model
- Swap regularly – you can change to another brand new car every few years
- Not your car – you won’t own the car, so you can’t sell or modify it in any way
- Tied to a contract – leasing ties you to driving the car for fixed a number of years
- Limited mileage – you’ll usually agree a mileage limit for the duration of your contract
- Possible charges – if you exceed your mileage limit, you will be charged extra
Unsurprisingly, personal car leasing and personal contract hire deals have risen massively in popularity over the last couple of years. This is partly influenced by the growing number of businesses that have chosen to abolish their own company car schemes in favour of paying employees a monthly allowance. This allowance enables private drivers to finance a car of their choice in a way that suits them best. Many choose to lease.
What about for business users?
As you can see, for private drivers who don’t care about owning the car they drive, leasing can be a viable and attractive option. However, is leasing a car a good idea for companies and business drivers?
Whether you need a single car for your business or a fleet of cars for your sales team, the pros and cons of leasing remain the same. If you’re still wrestling with the question ‘should I buy or lease a car’, there are a few additional things to consider.
Leasing helps your cash flow. You won’t need to spend cash to buy the vehicles or fund a hefty deposit payment. And because the monthly payments are fixed for the length of your lease agreement, this helps your business budget too. You might also be able to reclaim part of all of the monthly rental costs against tax and also claim the VAT back too.
Additionally, by including a maintenance package, you won’t need to worry about any ongoing costs either. You can switch to a brand new vehicle every few years too, so that’s good for the image of your business.
Is it better to lease or buy a car?
So, having weighed up the different options, taking into account the various pros and cons to owning or leasing a vehicle, is it better to lease or buy a car?
Clearly, that’s a question only you can answer. There are millions of vehicles on the UK roads. Many are owned. Many are leased.
For those drivers who still ask ‘is it better to lease or buy a car?’ but don’t want the restrictions and potential expenses of owning the car they drive, the flexibility, accessibility and affordability of leasing provides a very attractive alternative.