If you’re in the market for a new set of wheels, deciding whether to lease or buy a car can be tricky.
Car leasing (also known as personal contract hire or business contract hire) is sort of like renting. You pay to have full use of a brand new car but you’ll never own it. The amount you pay is the value the car depreciates over the course of your contract.
When you buy a car, the car is obviously fully your property, so you can do whatever you please with it. There are many ways to finance a car, like PCP finance, car hire purchase, lease purchase, buying a car on a credit card, paying cash for a car, and taking out a car loan. Each works differently and has their own pros and cons.
In this post, we’re going to look at whether you should lease or buy a car more broadly. We’ll look at the advantages and disadvantages of both leasing and buying, and put forward some key questions to ask yourself if you’re deliberating!
Leaning towards leasing? You can compare car lease deals easily with Lease Fetcher - we have rounded up the market-leading personal car lease and business car lease offers from UK brokers!
What are the advantages of leasing a car?
There are many pros and cons of leasing a car to consider - here are the advantages:
- Low up front payments - you can secure a lease deal with a low deposit (called an initial rental). You can even get a no deposit car lease, where your first month payment counts as your initial rental.
- Fixed monthly payments - the cost to lease a car is agreed up front - the price you pay each month stays the same for the entire length of your car lease contract.
- Brand new car every few years - lease contracts are only for brand new cars and usually last 3 years. This means you get access to the very latest technology every few years and you’re covered by a lease car warranty for the contract duration.
- Access to higher spec cars - your budget can stretch further since you’re only paying the cost of depreciation. This widens your options to more expensive models you might not otherwise afford.
- No hassle reselling - the leasing company is the registered keeper of the lease car, so when your contract winds up, you hand it back to them. No need to haggle for a good return price after it has depreciated by 50%!
- Road tax - road tax is included in the lease price meaning you can streamline more motoring payments into one! Some deals also include breakdown cover, maintenance, and insurance, but check the finer details with the broker.
- Tax benefits for business - businesses are entitled to a car lease tax deduction in some circumstances - you can recover 100% of the VAT if the car is purely for business use. See our “how does business leasing work?” post for more.
What are the disadvantages of leasing a car?
That’s a lot of food for thought! Here are some cons of leasing to chew on:
- No option to buy - if you grow to love your lease car, there is no way to buy it outright like you can with a personal contract purchase, lease purchase, or car hire purchase agreement.
- No customisation - since there is no way to accurately work out how modifications will affect the rate of depreciation, you can’t customise the car. You can select car lease extras as part of your deal and you can put a private plate on the lease car, but that’s as crazy as you can be!
- Poor deal selection for poor credit scores - you generally need good credit to lease a car. If you fail your car lease credit check, you can ask about appointing a car lease guarantor, otherwise you’ll be limited to cheaper models for higher prices.
- Potential return charges - you may be hit with lease car return charges at the end of your lease if it has damage beyond what’s acceptable in the BVRLA guidelines. You’ll need to service the lease car and make sure all lease car repairs are done to the leasing company's specifications to avoid extra charges.
- Mileage restrictions - mileage affects depreciation so you need to agree on an allowance when you set up your contract. If you go over it, you’ll receive hefty excess mileage charges. If you need a generous allowance, you can get a high mileage lease deal.
- Penalties for terminating the contract - if you end your car lease early, you’ll likely still have to pay the entire cost of the lease as if you were still keeping the car. If you’re having financial problems, you can ask about a car lease transfer.
- No used cars - you can’t lease a used car. If you want to lower the price of your deal, you’ll have to try other methods like choosing a cheaper car. Lease prices for new cars are generally lower than buying however.
What are the advantages of buying a car?
That was a pretty extensive overview of the factors for and against leasing - but how does it compare to buying a car? Here are the pros of buying a car:
- Full control - you own the car so you can pimp it out however you see fit. No need to ask for permission!
- No mileage restrictions - you can do as many miles as you like.. Your only concern here is how much it’ll depreciate when you come to sell it on, but you’ll not be hit with extra charges like leasing.
- Keep as long as you like - you can keep the car for as little or as long as you like, rather than agreeing upfront how many months your contract will be for.
- No damage charges - if you’re not an accident-prone driver, you can scrape and bump the car without being hit with extra charges. You just need to consider how it affects resale price.
- New or used cars - you can choose whether to buy a new or used car, depending on your budget.
What are the disadvantages of buying a car?
Those advantages sound pretty juicy - but you need to take into account the cons of buying a car:
- Cash tied up - your cash is tied up in the car, which is a depreciating asset. Generally, 40% of the car’s value is gone after 3 years, so it’s a pretty terrible investment.
- Hassle reselling - nobody likes selling their cars on. The paperwork. The rubbish sale offers from dealerships. Randoms on Gumtree messing you around. It’s a horror show!
- Budget may limit model options - your budget may restrict what spec car you can get. You may have to settle for a cheaper model or trim.
- Payments normally higher - when you buy outright, the deposit and monthly payments are often a lot higher since you’re working to pay off the cost of the whole car.
- Long term maintenance costs - you will generally have the car longer than an average lease contract, so you need to deal with and pay for maintenance and repairs outwith warranty that come with an older car.
How do I decide between leasing or buying a car?
It isn’t an easy task deciding whether to lease or buy a car. We’ve determined the main questions you need to ask yourself before committing to either option:
- How long do you want the car for? If you like to update your car regularly, leasing is the way to go. If you can see yourself with a car for the long haul, buying is for you.
- How is your credit score? If you have a good credit score or higher, then you’ve got lots of great leasing options. If you have a poor credit score, you should look at buying.
- How many miles do you need? If you do up to 20,000 miles a year, then leasing is a good choice. If you need more than that, it’s likely more financially savvy to buy.
- Are you a careful driver? If you treat your car like a newborn baby, then leasing is ideal. If you find yourself regularly scraping or bumping your car, buying may be a better option.
So, in summary, you should lease a car if:
- You like a new car with the latest tech every few years.
- Low upfront and monthly payments are important to you.
- You have a good credit score.
- You don’t care about customisation.
And you should consider buying a car if:
- You prefer to keep your cars for longer periods of time.
- You like to make modifications to your car.
- You have very high mileage requirements.
We’ve done comparison posts of leasing vs finance methods if you want to dig your teeth in deeper. We’ve analysed PCP vs lease, hire purchase vs lease, and lease vs lease purchase.
If you’re leaning towards leasing, you can save some big bucks by comparing car lease deals with Lease Fetcher. We’ve gathered leading personal car lease and business car lease deals from brokers all across the UK to make your search so much simpler.