Leasing vs Buying a Car: Which is Right For You?

If you’re thinking of getting a new vehicle, you may be wondering whether it’s better to lease or buy your next car. In this article, we’ll explain the key differences between buying and leasing a car and the pros and cons of each.

Leasing a Car

When you lease a car, you are essentially renting it long-term. Car leasing is typically done through something called Personal Contract Hire (PCH) whereby you pay a deposit followed by monthly payments for the duration of your lease. This will usually be for a period of two to four years. Often, you can keep your monthly payments lower by paying a larger upfront deposit.

Throughout your contract, you don’t own the car and when your lease period ends, you will be expected to hand it back to the leasing firm. As part of your agreement, you will have a mileage limit to stick to and if you go over this, you will incur further charges. You’ll also have to agree to keep the car in good condition since you’ll be handing it back at the end of your contracted period.

Pros

There are several advantages to leasing a car.

• As you are only leasing, rather than buying, the car, your monthly payments will typically be lower.
• You won’t need to worry about ongoing maintenance costs as lease cars come with a warranty and don’t need an MOT for the first three years.
• At the end of your lease period, you can choose another new car.

Cons

Of course, there are downsides to car leasing too.

• If you don’t keep up with your monthly payments, your car could be taken away.
• At the end of your contract, you don’t own the car so will need to buy or lease a new one.
• If you want to end your agreement and give the car back early, there will usually be a charge for doing so.
• If you don’t stick to the agreements set out in your contract, you may end up paying extra for excess mileage charges, damage charges or late payments.

Buying a Car

You can buy a car outright with your own money or using a loan or credit card to pay for the car upfront. You can also enter into a car finance agreement, such as hire purchase (HP) or Personal Contract Purchase (PCP) to buy a car.

With HP, you pay a deposit and monthly instalments, as you would when leasing a car, but at the end of your agreement, the car belongs to you. PCP is similar but your monthly payments will typically be lower and at the end of the period, you will have the option of making a more significant, one-off payment, sometimes called a ‘balloon payment’ to purchase the vehicle. If not, you’ll need to hand back your car, as you would with a lease car.

Pros

There are several benefits to buying, rather than leasing a car.

• If you are considering buying a car, you can consider both brand new cars and the used car market too, giving you more options.
• You will own the car outright
• You won’t have any mileage restrictions

Cons

However, there are drawbacks to buying a car.

• You will need to cover ongoing maintenance costs.
• Finance agreements tend to be spread over longer periods than lease contracts so that you may be paying off your new car for several years.
• Your car’s value will depreciate over time.

In Summary

There are pros and cons to both leasing and buying cars. What you decide will depend on a number of factors, such as how much you’re willing to pay upfront, how often you want to change your car, and the affordability of monthly payments and maintenance costs.

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