Is It Better To Lease Or Buy A Car?

When looking for a new vehicle, some customers can be unsure whether to lease or buy a car. One of the main benefits of leasing a car is how it can be cheaper than buying the car outright.

Aside from buying a property, investing money into a car is one of the most expensive long-term financial commitments in your life. Many people are put off from purchasing a new car outright, or with finance, given the large amount of money required.

This is one of the main reasons why car leasing has become increasingly popular with domestic and business drivers, as you don’t need to spend thousands upfront before you receive the car. And while you still need to pay a down payment to lease a car, the overall costs can often be more affordable than buying outright.

Whether it’s cheaper to lease or buy a car depends on a number of different factors, which we go into more detail below.

Leasing vs. buying a car: things to consider

Leasing vs. buying a car has become an often discussed topic. Leasing has soared in popularity over the past decade and the ability for personal customers to access the business user discounts has fuelled the growth. Combined with the convenience of providers like Leasing Options offering all makes and models in one place online from the comfort of your own home. Eliminating the risk of any negative equity or owned a depreciating asset, Leasing is only expected to become the go to way to drive a car.

Mileage

The more miles a car has driven the more its value depreciates, hence the higher costs. The predicted mileage on the car allows the leasing company to put an estimation on its value by the end of the contract.

Due to this, going excessively over the mileage cap could incur extra costs. However, while excess mileage charges can sound scary, they are often not nearly as onerous as people think. Every extra mile could cost you as little as 1p with Leasing Options.

When leasing a car, to avoid any surprises at the end of the agreement you should ensure that you give an accurate estimate of your annual mileage. You Account Manager will be able to help you to work this out.

Your budget

In many cases leasing a car will require lower monthly payments compared to financing a car on the same terms. This is because, as we mentioned above, a lease requires you to pay for the depreciation of the car, while a finance agreement is based on the vehicle’s full cost. This is why it is important you look at your monthly incomings and outgoings to assess which one is more affordable for you.

Down payment / Initial Rental

When it comes to leasing a car, you will usually be asked to place some sort of initial payment at the start of the contract, you may see this described as initial rental. However, this is not the same as asking for a deposit. By making a larger payment at the start of the lease, the driver will be able to reduce the remaining cost paid each month.

Usage

A lease agreement will also include guidelines relating to wear and tear of the car. The vehicle is not expected to be in as new condition when returned. At the end of the lease, it is accepted that there may be some light damage to the car that comes from general usage. If the car is returned with too many scratches, dents and costly damage, then the driver will be expected to pay for this in line with the guidelines laid out in the contract.

Main benefits of leasing a car

If you decide to lease a car, you get to enjoy the many benefits it can provide, which include:

  • Lower monthly costs

You usually have a few options to choose from when it comes to the initial payment, if one is required at all. This means you can control the amount you pay each month across the length of the contract. It can often therefore be cheaper to lease a car – as long as you adhere to the wear and tear guidelines, do not drive the car excessively over the mileage limit, and do not terminate the lease early.

  • Enjoy a better car

You may be able to get a higher model or specification against purchasing. As the cost of leasing a car is often lower, this opens you up to a wider range of vehicles than if you were paying outright or taking up a finance option. Because you are paying for the car’s deprecation for the lease period, instead of the full value of the car, often the high specifaction can come in at a lower monthly payment.

  • Fewer repair costs

You will be driving a new, and more reliable car, which makes it less likely you’ll have to pay out for big repair items like aircon units or timing belts. The battery will also remain in good working order throughout the lease period. Plus, when you take up the contract, you have the option of including maintenance cover, which covers small repairs, tyres and servicing.

  • Avoid the hassle of selling a car

At the end of the contract you return the car and walk away (provided you meet the contract requirements). Or, you can take up a new lease for a new car. This means you don’t have to go through the hassle of selling it yourself and securing a good price. When you own a car outright, its value in 3 years’ time will be lower than when it was purchased, which means you will never get a full return on your investment.