Which is Better Leasing a Car or Buying?

When looking for a new vehicle, you’ll need to decide whether you want to lease or buy. To do this, you'll need to familiarise yourself with the pros and cons of both choices. Listed below is a helpful guide on the advantages and disadvantages of leasing and buying that will enable you to make the best decision for your circumstances.


What's the difference between buying and leasing?


Buying a car means you own it, but unless you have a lot of spare cash lying around, you’ll have to pay interest (sometimes a lot of it!) on the loan option you take out. On the other hand, leasing offers you flexibility and is usually cheaper, but you’ll never have a car to really call your own.

Leasing

Thinking of leasing a car? Here are a few points to consider

For most of us, it would seem that leasing is more cost-efficient than buying. Monthly payments are typically lower because leasers are not paying back interest on any bank loans. Leasing is straightforward too - you simply borrow and repay the difference between the car’s value when new and the car's estimated value at the end of the lease, on top of any fees, of course.

Major pros of leasing

Leasing allows you to get a brand-new car every 2-4 years - this is a big advantage for people who quickly tire of their vehicles. Cars are also leased during their most efficient years, so you'll usually have fewer repair costs to account for.

You can relax knowing the vehicle is covered by the manufacturer's warranty, which may also include complimentary oil changes and scheduled repairs.

Do you own a business? If so, you’ll be pleased to hear that there are potential tax benefits for business owners who lease cars through their company.

People who have expensive tastes in cars but average salaries can also get their hands on luxury models that they wouldn’t be able to afford if buying outright. Not only that, but you can access vehicles with more advanced safety features.

The vehicle’s trade-in value will not fluctuate and since you lease, there is no need to go through the inconvenience of selling the car when you’re done with it. When the lease is up, you simply take the car back to the dealer.

The downsides of leasing



Although leasing can be cost-efficient in some cases, it can also be more expensive than buying a car with a loan. You will need to take into consideration multiple factors when deciding whether leasing will save you money in the long term. In particular, you'll want to consider:

1. How long you see yourself leasing the car
2. Whether you want to drive an expensive model

Obviously, if you lease a car or cars for a long time, you may end up paying more for leasing than you would if you took out a bank loan. On the other hand, buying a vehicle outright will mean you are responsible for any repair work, and the cost of these repairs may add up over the years.

Disadvantages of leasing

If you are stuck in the cycle of leasing one car after another, your monthly payments will go on forever, which isn't the case when you buy a vehicle outright.

Furthermore, lease contracts give you a mileage limit. In the event that you surpass that limit, you'll be slapped with an excess mileage penalty charge. That can vary from 4p to 70p per mile, however, the cost depends on your car model and finance provider. Ensure you figure out the number of miles you intend to drive beforehand to avoid this hassle. Note that unused miles do not lessen the penalty charges.

Also, when you are finally done with your lease and return the car to the dealer, if it's not in good condition, you will be the one covering the repair charges. Therefore, if your children are known to go wild with felt tips or you are no stranger to picking up dents and scratches in car parks, be prepared to pay extra at the end of your lease contract.

Another disadvantage of leasing is that you’ll have to pay more money if you are unhappy with the car you picked or can’t cover its cost. It is likely that you will have to pay thousands of pounds worth of penalties and termination fees if you attempt to end your lease contract early. There will also be no monthly payments for these fees and the payment will be due immediately.

Lastly, you need to return the vehicle to the dealer in the same condition you received it in, which could prove costly. However, this does exclude unavoidable wear and tear and any damages that were there prior to you leasing the car.

Buying

Thinking of buying a car? Here are a few points to consider

There are a number of ways to buy a car. For example, you can take out a personal loan with a vehicle dealer, building society, bank, or maybe even a peer-to-peer lender.

Personal loans are relatively simple. You are lent the money for a set number of months (or years) and then you repay a fixed sum every month. Your reimbursements also include interest rates.

Furthermore, personal loans are generally 'unsecured’, which means the money you owe isn't supported by a possession you already own - for instance, your home.

Similarly, as with all loans, you’ll need to ensure your payments are affordable. You also need to agree with the terms and conditions prior to taking out a loan.

Major advantages of buying

Firstly, buying is more flexible as you can pick the loan duration and can acquire money to cover the entire expense of the vehicle if you don't have a deposit. Remember the longer your loan is, the more interest you will pay.

In addition, if you hold full ownership of the car, this gives you the opportunity to do however many miles you wish, make alterations, and sell the vehicle if you want to.

Plus, having the cash upfront gives you more ability to haggle with the dealer over the cost. This could pave the way for a potential bargain.

Disadvantages of buying

Unfortunately, you may not be able to get a loan if your credit score is low. If your financial record is poor, you will also have difficulty finding a loan and when you do, the interest rates will often be higher.

Also, If you fail to make reimbursements then you may have the courts on your case. Neglecting repayments will also harm your credit score.

It is worth noting that all vehicles lose value rapidly - this is called devaluation. As such, when you come to sell the car, there is no guarantee it will be worth the same amount you paid for it.

Before you make your decision, here are a few more points to consider

Some drivers settle on longer-term vehicle loans of six to eight years to get lower monthly payments. However, long loans can be risky, and purchasers may find leasing a better alternative.

Longer loans can result in you paying more than the vehicle is actually worth, which is referred to as an ‘upside-down loan’. On the off chance that you write off the vehicle or it is stolen, the exchange, resale and insurance value is probably going to be short of what you actually owe.

Purchasing a vehicle with a loan isn't the best approach if you want to swap your car every couple of years. Taking out a long-haul loan to then exchange the car before the end of your contract will leave you with a huge amount of charges to pay. Compare these charges with the original loan and you may find leasing to be the more ideal option.

Ultimately, if you want lower monthly payments and like to drive a new car every couple of years, leasing will be the better solution. However, if having a car to call your own is more important to you, buying a vehicle - whether this is upfront or by taking out a long-term loan - is a worthwhile option.

A final word from us

In conclusion, we can't give you a definite answer on whether it is better to lease or buy a car as every person’s circumstances are unique. Make sure you consider all the factors outlined above before deciding whether to lease or buy your next car.
 If you would like to discuss your options with an expert team, please contact us on 01212721210.