buying vs leasing: which is the best choice for you?
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Buying and leasing each have their own pros and cons, and the choice you make very much depends on your lifestyle and budget. Choosing between the two can be tough - is it better to pay outright for a vehicle, or do you want the versatility of a lease agreement?
In this guide, we will look at the benefits and drawbacks of each so that you can make an informed decision.
What are the pros and cons of leasing a car versus buying?
When you enter into a lease agreement, you are essentially renting the car for an agreed period. Generally, you will pay a lower monthly amount than other finance methods, and you will also not need to worry about the car depreciating in cost while you are driving it. You have the freedom to exchange it for a new model when your lease agreement is up - usually after two or three years - and under no pressure to buy the vehicle at the end of your contract. You can also make the most of enjoying newer, better-equipped cars for a considerably lower price than you would pay to own it.
For some people, the idea of not being tied to a vehicle long term is an attractive prospect, with the end goal being merely returning it to the leasing company in the same condition you rented it. Of course, leasing a car means you do not own it, so any damage accrued during your lease period will need repairing before you return it. However, if you lease a brand new car, it will usually still be under the manufacturer’s warranty, so repair costs should be covered.
One of the main issues with leasing a car is the restrictive nature of your contract. For example, there may be a mileage limit that you will need to pay for should you exceed it. Similarly, if you wish to return your car before your lease agreement ends, you will be expected to pay a sometimes substantial amount.
Buying a car outright, however, means that it is yours to use as you like. You are not tied to any sort of agreement, and you can sell your car whenever you want to upgrade or change models.
Can you buy your car before the lease is up?
Some companies will have a buyout amount set for certain vehicles, meaning you could potentially buy the car before the lease is up. For example, if you want to return your car before the end of your lease, you will probably be asked to pay the remaining monthly costs as a lump sum, which might end up being more than the loss you would get from selling it as an owner. This could be a good option to avoid the high cost of getting out of your contract early. You can check the market value of your leased vehicle to see if this is worthwhile.
Is it cheaper to lease a used car?
Leasing a used car should be cheap in theory, because any depreciation of that vehicle will have occurred when it was new. In terms of investment, however, it is not a healthy financial option. The face is that you won’t have anything to show for it at the end of your lease, and you are likely to end up paying a great deal. Say you pay an upfront lease cost of £1000 than 35 months at £150 a month - that works out to £6250 for a vehicle that you have to give back.
However, it is likely that if you are looking to lease a car, it will be a newer model that you perhaps wouldn’t be able to afford otherwise. If you are looking for a smart vehicle with enhanced features, leasing may be a good way to enjoy that for less money than buying it.
What is the car leasing process?
In general, a car lease will run from between two and four years. You start by choosing the car you like that sits inside your budget. You will then usually pay a processing fee and agree to the terms of your lease, including mileage limits and timescale. Check your lease to see if there are any benefits such as road tax or breakdown cover. You may also want to add servicing as an optional extra.
You can get a lease deal directly from a dealership, or you can go online and shop around for good deals and offers. Make sure you double-check that you are purchasing a consumer contract as leasing is generally done by businesses. You could also opt for an online finance broker who will match you with a leasing company.
Is car leasing available with insurance?
Insurance is not generally offered alongside a lease, meaning it is your responsibility to sort out your own insurance. You must have 'third party only' insurance to be legally allowed on UK roads; however, a fully comprehensive policy is a better option as it covers you for many more situations.
There are companies that may offer optional insurance as an extra - you should look into features such as breakdown cover, accident cover, and glass and windscreen damage.
Looking to lease a car? Make sure you know the ins and outs of the vehicle you are buying with a vehicle check from My Car Check. Start your journey by entering the registration number below.