Car leasing is becoming a more and more popular way of financing a brand new car. With an increasing percentage of drivers leasing their cars and an estimated 5 million vehicles on British roads today being leased, according to the BVRLA (2021), it certainly is a credible option.
It can be a tough call to choose between leasing and buying your next car. The decision can often come down to your priorities and circumstances. We’ve put together this handy guide that is all about leasing a car vs buying one that explains all you need to know.
What Is The Difference Between Leasing And Buying A Car?
Although both buying and leasing mean that you can drive a brand new car, they are two very different options of car financing. Buying a car means that you will own the car, but you’ll need to have a large cash amount to pay for this or face a significant interest rate. Leasing a car will give you more affordable lower costs but you will never own the car.
8 Differences Between Leasing And Buying A Car
So how exactly does leasing differ from buying a car? We break the top 8 differences down for you.
Ownership
You don’t own the car if you lease it, you just pay to use it for a fixed amount of time and then return it for another lease. If you buy the car, you own it and get to keep it for as long as you want and can add any modifications and use it however you want.
Upfront costs
When buying a car, you will likely need to put a large amount of money down upfront. Typically as much as 10% upfront is required to get a good finance rate if you’re buying. However, the amount upfront for leasing is flexible and often much less. You can even choose a no deposit deal if this suits you better.
Monthly payments
The monthly payments when you buy a car are typically much higher than leasing because you are paying for the entire value of the car.
Returning the vehicle
When your lease contract comes to an end, all you do is simply hand the car back and organise a new lease deal. If you buy a car, you can own it for as long as you like and when you want to change vehicles, you will have the responsibility of selling or part-exchanging your own car.
Depreciation
For a lease deal, the future value of the car will not affect you or your monthly payments. If you buy a car, it will depreciate in value, however, the equity is yours to use as you want to.
Mileage
You will agree to an annual mileage restriction with a lease deal and decide how much you can drive the car, with extra charges if you go over this limit (although this can be re-negotiated mid-contract). For a bought car that you own, you can drive it as much as you want to with no restrictions.
Modifications
If you own a car you can make any modifications as you wish to the car, such as changing the wheels. If you are leasing, you will need to return the car in the same way that you bought it and any customisations must be removed before doing so. This means you won’t be able to do any permanent alterations to the vehicle.
Wear and tear
When you return your lease car, general wear and tear is expected and will not constitute for any damage, but anything worse than this will need to be charged for. So if you’re pretty rough on your cars, you may be better off buying your car, where the only worry for excessive wear and tear is how it will affect the resale value.
Leasing Vs Buying: Advantage & Disadvantages
To help you find out whether leasing or buying is the best option for you we look at the pros and cons, starting with the benefits of leasing a car vs buying.
Advantages Of Leasing Vs Buying
- Brand new car every few years
- Lower upfront payment options
- Fixed low monthly payments
- No hassle of selling your car
- No depreciation worries
- Fewer repair costs
Disadvantages Of Leasing Vs Buying
As appealing as a lease may be, there are a number of disadvantages:
- Mileage restrictions
- Excessive wear and tear charges
- Early termination fees
- Never own the car
- Limits to vehicle modifications
- Requires good credit score
Leasing With LeaseLoco
If after reading this, you’re thinking that leasing a car is the better option for you then you’re in the right place to start looking! Searching and comparing lease deals is really easy to do on LeaseLoco. You can find a deal that meets all your requirements in just a few clicks using the filters on our search page. Whether you’re looking for a family SUV or a small city car, we’re confident you’ll find a deal for you.
Search and compare the hottest car lease deals now.
FAQs
Is it better to just lease or buy a car?
At the end of the day, this comes down to personal preferences and financial circumstances. If you like driving new cars for low monthly costs then leasing is a good option. If you want to hold on to your car for more than a few years, it may be a better option to look at buying the car.
What happens if you crash a leased car?
If you’re involved in an accident, you will need to tell both your leasing company and your insurance company. Any damage to the car that is covered by your insurance will need to be carried out to the leasing company’s specifications. Once any repairs have been carried out on your lease car, you can be back on the road again. If your car is written off, then the funder of your agreement will provide a settlement figure to end your contract. Your insurance will usually provide you with a fair market value of the car to help cover this, but there can often be a shortfall. In this instance, it may be worth considering gap insurance which would pay the difference in this instance.