Cars: buy or lease?

When you're considering whether it's better to lease or buy a car, it isn’t a one-size-fits-all choice. The answer depends on several deciding factors, including your budget and circumstances. In some cases, buying a vehicle outright may be possible if you have immediate funds. In comparison, a leasing deal allows you to spread the cost of a new car.

Before choosing between buying and leasing, it’s worth considering a few key questions:

• How long do you plan to keep the car? Are you looking for a long-term vehicle you’ll own for years, or do you prefer changing cars regularly and driving the latest models?
• Do you want to own the car? Ownership gives you long-term control, while leasing focuses on use rather than ownership.
• What’s your budget and cash flow? Buying often requires a larger upfront cost, while leasing spreads payments into predictable monthly instalments.
• How important are fixed costs? Leasing can make it easier to budget, while buying may involve more variable long-term costs.
• How will you use the car? Mileage, maintenance responsibility and flexibility can all influence which option suits you best.

How does car leasing work?

Car leasing is similar to renting a car but long term. It's also known as Personal Contract Hire (PCH). Leasing works by paying an initial rental, typically the equivalent of one to 12 months instalments. This is followed by fixed monthly payments for a period of between two and four years.

Unlike other finance options, such as PCP, you have to return the car at the end of the lease, and there's no balloon payment.

Learn more about car leasing in our what is car leasing guide.

Benefits of leasing a car

If you decide to lease a car, the main advantages include the following:

1. 1. Flexible initial payment

Unlike a deposit, the initial payment goes towards the overall cost of the leasing deal. You can choose to pay between one and 12 months of instalments, and the more you pay, the less your monthly payments will be.

1. 2. Lower monthly costs

Monthly costs are fixed, and you can choose a vehicle that suits your budget. With a higher initial rental payment, your instalments will be lower over the term.

1. 3. Drive the latest models

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.

1. 4. Fewer repair costs

Driving a new and more reliable car means it’s 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, and vehicles are usually covered by a manufacturer’s warranty.

Plus, when you take up the contract, you have the option of including maintenance cover, which covers minor repairs, tyres, and servicing.

Learn more about the benefits of car leasing in our guide.

Disadvantages of leasing a car

Some things to consider before leasing a vehicle include the following:

1. Mileage allowance

A mileage allowance is agreed upon at the start of your leasing contract. This is flexible to suit your driving needs. However, if you exceed this, an excess mileage charge occurs. If you are nearing this allowance, it may be possible to increase it and avoid any surprise charges – helping you save costs overall.

1. Early termination fee

If you need to end your contract early, an early termination fee applies. For more information, visit our guide on cancelling a lease early.

1. Fair wear and tear policy

A fair wear and tear policy covers all lease cars. This allows for the normal wear and tear expected during the contract period. In most cases, you won’t have to worry about a few chips or small scuffs. But anything significant may incur a damage fee.

What about buying a car?

Buying a car outright means you need the funds available to make a purchase. This, of course, could be from your own money. However, other options such as PCP finance, bank loans and HP finance are also available.

• Cash/credit card (buying outright): Cars can be purchased using cash or a credit card, and this allows you to own a vehicle outright from day one. While this avoids ongoing monthly payments, it's worth noting that using a credit card can incur steep interest charges, making it more expensive than other finance options over time.
• Bank loan (buying using finance): Bank loans allow you to buy a car using borrowed funds. You repay the loan in fixed monthly instalments over an agreed term, with some flexibility in how long you'd like this to be. But rates vary on several factors such as credit history, income, and loan term.
• Personal Contract Purchase (PCP – conditional buying): PCP is a common finance option for purchasing a new vehicle that offers lower monthly payments by deferring part of the vehicle’s cost to the end of the agreement. You pay a deposit towards the car, which is followed by fixed monthly instalments plus interest. At the end of the contract, you can choose whether to pay a final balloon payment to own the car, use any equity as a deposit towards a new car or return the vehicle instead.
• Hire Purchase (HP – buying using finance): Hire Purchase works in a similar way to PCP, but there's no balloon payment at the end. This means monthly payments are higher over the agreement, but you own the car outright at the end of the contract.

Benefits of buying a car

The main advantages of buying a car outright include the following:

1. 1. Ownership of the car

You own the vehicle outright, or have the option to own it at the end of the agreement if you're buying using finance.

1. 2. No mileage allowances

There are no mileage allowances to worry about if buying outright. However, there may be minimal allowances if using finance options.

1. 3. You can hand the car back if using finance

If you use car finance to buy a car, there's an option to hand the vehicle back or part-exchange it for a new car.

Negatives of buying a car

Some things to consider before buying a vehicle include the following:

1. 1. Less flexible finance options

Car finance options tend to be less flexible and lengthier than leasing deals. So, you may not be able to upgrade as regularly.

1. 2. Hassle of selling a car

If you want to buy a new car, you'll need to sell your existing one first. This can be challenging depending on the used car market prices.

1. 3. Depreciation costs

In a lease contract, you don't have to worry about depreciation. However, if you own a car, this cost should be considered, especially when it comes to reselling.

1. 4. Higher maintenance costs

The responsibility of servicing, repairs, and maintenance falls to you when owning a car. As it gets older, the costs of maintaining it often increase too.

Key differences between leasing and buying a car

So, is it better to buy or lease a car? Let’s take a final look at some key differences. The main difference between buying and leasing comes down to ownership, cost structure, and long-term commitment. When you buy a car, you own the vehicle and take on responsibility for its depreciation, resale value and ongoing costs. Leasing, on the other hand, allows you to use a car for a fixed period with predictable monthly payments, before returning it at the end of the agreement.

Understanding how they differ can help you decide which approach better suits your budget, driving habits and long-term plans. We’ve compared the most common options across leasing and buying a car to help highlight the differences at a glance:

Need to sell your car?

The process couldn't be simpler. With Motorway, 5,000+ dealers compete to give you their best price! And you can sell your car in as little as 24 hours. Enter your number plate and mileage for a quick car valuation today.

How depreciation differs between leasing and buying a car

Depreciation is one of the biggest costs of owning a car, particularly in the first few years. When you buy a car, its value typically falls fastest early on, meaning you absorb the loss in value over time.

With leasing, depreciation is built into the agreement. Rather than worrying about how much the car will be worth later, you pay a fixed monthly amount based on its expected loss in value over the lease term, then return the vehicle at the end.

Is it cheaper to lease or buy a car?

Whether buying or leasing a car is cheaper depends on your viewpoint and what you want from the car.

On paper, leasing often works out cheaper month to month, as payments are based on the vehicle’s depreciation rather than its full value. This can make costs more predictable and easier to manage, particularly if you prefer changing cars every few years. Leasing also minimises maintenance costs, and road tax is included within the monthly instalment.

Buying a car may feel like better value for drivers who prioritise ownership, as the vehicle becomes an asset over time. However, this usually involves higher upfront costs, interest on finance agreements and responsibility for depreciation and resale.

So, is it better to buy or lease a car in the UK?

Now that you’ve seen how both options work, you may be wondering “should I buy or lease a car?” The right choice should be based on your budget, circumstances, and personal preferences.

When it may be better to lease a car:

• It's ideal if you want to upgrade your car regularly
• Fixed lower monthly costs make managing your budget easier
• There's no hassle of selling the car to buy your next one or depreciation worries

When it may be better to buy a car:

• You want to own a car for more than a few years
• You don't want to have any restrictions such as mileage to worry about
• Owning the vehicle outright is important to you

Exploring current car leasing deals can help put real monthly costs into context. At Leasing Options, you can browse a wide range of deals based on your budget, preferred make and model, or mileage needs, all in one place.

Our special offers include a broad selection of vehicles from leading manufacturers, with competitive pricing on brand-new cars. Free delivery, road tax and a full manufacturer’s warranty are included for the duration of the agreement, helping you understand exactly what you’ll pay each month with no hidden extras.

Lease or buy a car: FAQs

What’s the smartest way to pay for a car?

Who benefits most from leasing a car?

Can you negotiate a lease price?

Do lease payments go toward purchase?

Is leasing a car financially worth it?

What's the difference between leasing and financing a car?

Can I end a car lease early?

What’s the difference between PCH and PCP?