Car leasing vs buying?
'Should I lease or buy?' is a common question asked by many businesses and private individuals who are looking for a new car or van.
Whether you should lease or buy really comes down to you as an individual or as a business. There are pros and cons of both - in order to make a decision, it's vital that you understand the differences.
Buying and leasing are different
When you buy, you pay for the entire cost of a vehicle. When you lease, you pay for only a portion of a vehicle's cost. This is the part that you "use up" during the time you're leasing it.
This is why monthly leasing payments are cheaper, compared to financing the entire cost of a vehicle. Read more on how leasing works.
So leasing is certainly the cheaper option in the short-term. Particularly if you want to drive a new car and change it every two or three years.
However, with most leasing agreements you won't own the car - unlike you would if you had purchased it. Therefore, if you are likely to drive the same car for many years until you've run it into the ground, you are probably more suited to buying it.
NB, there are some leasing agreements which do allow you to own the vehicle at the end of a lease. See leasing options.
Should you lease or buy? Here's our view...
Lease, if you:
- Enjoy driving the latest new vehicle and like the idea of replacing it every two or three years
- Want lower monthly payments (or the opportunity to drive a more prestigious car)
- Like having a vehicle that is always under warranty
- Like driving a vehicle that has the latest safety features
- Don't like trading and selling used vehicles
- Don't want to lose money on high depreciation costs
- Have a stable and predictable lifestyle / business
- For businesses - Want to free up cash flow
- For businesses - Don't want ownership? Off balance sheet funding is available with some contracts (contract Hire), which frees up your credit lines
Buy, if you:
- Don't mind higher monthly payments (if taking out a loan or other finance)
- Prefer to build up trade-in or resale value
- Like the idea of ownership
- Don't mind the cost of repairs after the warranty has expired
- Prefer to drive the same vehicle for many years to spread out the cost
-
Expect lifestyle / business changes in the near future
>> Read our article on 'Lease or buy?'
Understanding the pros and cons
These pages contain more detailed information on the benefits and pitfalls:
Leasing - Read more on the benefits of leasing and things to consider
Buying - Read more on the advantages and disadvantages of buying
Need more advice?
Talk to us to see if leasing is right for you. Call us on 0845 052 5268 or send us an enquiry.
