Should You Lease or Buy a Car? How to Decide

The pros and cons of both.

Wondering if you should lease or buy a car? You’re in the right place. 

Here, we explain the difference between leasing and buying, when it’s best to choose one approach over the other, and the pros and cons of owning or renting a vehicle. 

Ready? Let’s dive in. 

Leasing vs buying a car: What’s the difference?

The main difference between buying and leasing a car is who ultimately owns the vehicle: 

  • When you buy a car outright, it’s yours to keep
  • When you lease a car, you return it to the leasing company at the end of the rental agreement

The most popular way to lease a car is with a personal contract hire (PCH). This is different from a personal contract purchase (PCP), which is a type of car finance. 

However, PCP and PCH have similarities. You need to make an upfront payment to secure your car of choice (a deposit with PCP and an initial rental payment with PCH) before making a set amount of monthly payments as part of the contract. 

At the end of a PCP deal, you can make a final one-off payment to own the car, return it to the dealership, or put the current market value of the vehicle towards a new car. 

Meanwhile, at the end of a PCH deal, you simply return the car to the lender and choose a replacement lease vehicle. 

Is it better to lease or buy a car? How to decide what’s best for you

Deciding whether to buy or lease a vehicle almost always comes down to personal preference. 

However, there are a few situations where choosing to buy rather than lease (or vice versa) simply makes more sense: 

When is it best to buy a car?When is it best to lease a car? 
If you drive more than 30,000 miles a year, buying might be better, as going over the mileage limits on a lease can be expensive.
If you have a large lump sum to spend on a car, it could be cheaper to buy outright in the long run. 
If you have a poor credit score (but money to spend on a vehicle), you may find it easier to buy. 
If you believe a car will hold its value for several years, you could sell it in the future to fund your next purchase.
If you don’t want to deal with the admin and upkeep associated with a car, leasing could be for you. Most lease agreements come with road tax and a full warranty included.
If you want to drive a brand-new make and model, leasing could be more affordable. 
If you don’t want the hassle of selling a car, leasing is the way forward. Simply return the vehicle at the end of the term and choose your next one.

Why buy a car? The pros and cons of owning a car

What are 3 advantages of buying a car?

  1. You own the car: The most obvious benefit of buying a car is that it’s yours. You only need to cover the running costs and maintenance. And you can make modifications, too! (If you want to modify a leased car, those changes need to be reversible).
  1. You can sell the car: Following on from the first point, the fact you own your car also means you can sell it. If you look after it, you may even make back a lot of what you spent on it in the first place, which you can put towards your next purchase. 
  1. You’re not restricted to how much you can drive it: If you own your car outright, you won’t have an annual mileage cap to worry about. Unlike a lease agreement, you can drive as many miles as you want without being charged extra. (Note: some car finance agreements include mileage caps — always double-check the small print!). 

What are 3 disadvantages of buying a car?

  1. Your car is a depreciating asset: As soon as you start driving a car, it loses value, making it harder to sell in the future. Plus, as your car gets older, it could experience more faults through general wear and tear. This could cost you more money to keep your car running. 
  1. You’ll need to spend more upfront: You’ll often need a larger deposit to buy a car compared to leasing. This is because you’ll have to pay a percentage of the car’s total value. In contrast, if you were to lease a vehicle, you’d usually only pay the first month’s rental fee (plus admin costs) upfront. 
  1. You’ll have to pay road tax: When you own your car, you’re responsible for taxing it each year. The cost of road tax can vary depending on your vehicle’s level of CO2 emissions. You should consider this when shopping around for a new car, as vehicles that emit higher levels of CO2 cost more to tax. 

Why choose leasing a car? The pros and cons of a lease car

What are 3 advantages of a lease car?

  1. You can pay less upfront: Many leasing companies will only ask for one month’s rent (plus admin costs) upfront as part of the rental agreement.
  1. You can budget your vehicle expenses: With fixed monthly payments, it can be easier to track how much you’re spending on your car. So long as you stick to the terms of the agreement (in other words, you don’t go over the mileage cap) and you keep the car in good condition, you won’t be slapped with an extra bill at the end of the lease. 
  1. You can drive a new car every couple of years: Buying a brand-new car every few years can become pricey. When you lease a vehicle, you can trade up for a newer model at the end of your agreement without forking out thousands of pounds. 

What are 3 disadvantages of leasing a car?

  1. You’re restricted to how much you can drive: Most lease agreements include a mileage cap, meaning you’ll need to track how many miles you drive in a year. A standard deal might let you drive between 8,000 and 30,000 miles a year. But if you go over this, you could be charged for any additional miles you’ve driven. 
  1. You could end up with extra charges: It’s not just the mileage restrictions that could add to your bill at the end of the lease agreement. If you return the car in a condition beyond “fair wear and tear”, you’ll be charged for any necessary repair work.
  1. You’ll need to pass a credit check: If you have a poor credit score with one of the leading credit agencies (Experian, Equifax, or TransUnion), you may find it challenging to get approved for a lease agreement. And even if you do pass a credit check, if your score is low, you could be faced with paying a higher deposit and higher monthly repayments to secure a lease. 

Can you sell a leased car in the UK?

No, you can’t sell a leased car, simply because it’s not yours to sell. You’re renting it for a set period, and at the end of the term, you’ll return the car to the lender. 

And while some companies might let you purchase the vehicle at the end of the lease agreement, it’s not standard practice. So, in short, if you can’t buy the leased car outright from the lender, you won’t be able to sell it. 

Finally, who’s responsible for insuring a leased car? 

Like when you buy a car, you are fully responsible for insuring a leased vehicle. 

In fact, many leasing companies ask that you take out a comprehensive car insurance policy as part of the rental agreement. You’ll usually have to provide proof that you’ve done this before you can drive off. 

Whether you’re buying or leasing, make sure you have the right car insurance in place before you get behind the wheel. Our new clients save an average of £155 on car insurance. Get your quote here

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