Lease vs Lease Purchase: Which Car Finance Option is Best?

Chloe Murphy 5 minutes Published: 05/07/2021

We may be a little biased, but when it comes to affordable, hassle-free driving, leasing really is one of the best ways to finance a car

However, when it gets to the end of the term and you have to part ways with yet another car, you may be someone who wishes they could hold on to their trusty car forever.

Though there’s no option to buy with regular business or personal contract hire leasing, you could benefit from another method of finance: a lease purchase. 

Though the names might have you thinking otherwise, a lease and lease purchase are actually pretty different! We’re going to go through how each works, the pros and cons, and how you can decide which is right for you.

While you’re researching, why not get an idea of what lease deals are available to you? We compare car lease deals from UK brokers. Finding the perfect personal car leasing or business car leasing deal has never been easier!

What is leasing?

At Car Lease Fetcher we’re fairly big fans of leasing. It’s one of the easiest ways to get your hands on a car, and comes without all the complications of buying and owning the vehicle yourself. You can read our expert guide “How does car leasing work?” to learn about it in real depth.

All you have to do is pay an initial rental, then monthly payments until the end of your 2-4 year contract. Since your payments are made up solely from the cost of the car’s depreciation over the length of the car lease contract, you get the lowest monthly payments available. At the end of the term, simply hand your back to the leasing company.

What is a lease purchase?

Unlike the version of leasing most of us are familiar with, a Lease Purchase is a form of car finance used in order to buy the car. 

You still have a similar process to leasing with the car lease credit check, initial rental, and low monthly payments, but where it differs is at the end of the contract. 

To match those same low monthly installments that you get with regular leasing, Lease Purchases basically defer the largest payment until the end. This usually works out at around 20% of the car’s total value, but once it’s paid, the car belongs to you. 

Pros and cons

Though the two ultimately offer different services, comparing the advantages of a lease vs lease purchase, the benefits are really pretty similar. 

Before we dive into the details, here’s our main pros and cons for a lease and lease purchase.

Leasing pros and cons

Pros

  • Lowest monthly payments

  • Brand new car every few years

  • Regular affordable upgrades

Cons

  • Mileage restrictions

  • Only available for new cars

  • You never own the car

Lease purchase pros and cons

Pros

  • Low monthly payments

  • Own the car at the end

  • Affordable for higher spec cars

Cons

  • Expensive balloon payment

  • Only available for new cars

  • No option to return the car

Which is right for me?

A lease and lease purchase both offer low cost monthly installments, and the chance to get a higher spec car than you might not with other finance options. But when choosing between the two, it really comes down to how you want to use the car, and whether you want to own it.

How are you planning to use the car?

High mileage drivers are likely better off with a lease purchase, as there's no restrictions on your miles. Though you’re not the owner of the car until the final payment at the end of the contract, you've committed to buying and therefore have more freedom with the car. 

With leasing, you never own the car at all, so you have to stick to your agreed mileage. Going over what you agreed with the finance company or dealership can result in hefty excess mileage charges, so if you’re planning a lot of miles, a Lease Purchase could be more cost efficient. 

Do you want to own the car?

Leasing and lease purchases are really on opposite, fixed ends when it comes to ownership. With leasing there’s no option to own the car, and with a lease purchase, you’re obligated to buy. 

Though leasing doesn’t offer the chance to purchase the car when your contract is up, you’re getting the lowest instalments out of all finance options, plus a brand new car every few years. 

On the other hand, lease purchase deals are entered with the understanding that you buy the car at the end of the term. This would be suited to anyone looking for prolonged low cost monthly payments, with a greater lump sum after a couple of years.

If you have the cash to splash upfront and you’re not sure whether to splurge or finance, see our posts on “what is financing a car” and “should I get a car on finance?” to help you decide.

Alternatives

If you think you’d like to use finance to buy a car but don’t like the idea of a lease purchase, there’s plenty of other options. However when you’re looking to own, there’s more to consider than just “What car should I buy?”. 

If you want total flexibility to buy a car online, buy a used car or just buy from a private seller, you may want to think about a personal car loan. Since you’re borrowing the total amount outright, you can buy any car from anywhere, and you won’t have any restrictions on how you use it. See our post on how to get a car loan.

Alternatively, you can also get a Personal Contract Purchase (PCP) or Car Hire Purchase (HP) deal. 

If you’re more leaning towards leasing, we’ve done a bunch of comparison posts to fully inform you:

You can use Car Lease Fetcher to compare car lease deals easily - we've rounded up personal car leasing and business car leasing deals from top brokers across the UK to make your search simple.

Or if you’re more keen on lease purchase, compare it with some of the other best ways to buy a car: