Even if you have the money to buy a car outright, leasing can still make sense depending on what you're after. We go through what each option involves, and what to look out for...
If you’re pondering between leasing or buying your next car, you need to be aware that there are advantages and disadvantages for both. That’s where we come in, because we’ve come up with a helpful list of pros and cons for each option to help you make an informed decision.
Pros of leasing a car:
Normally a lower monthly payment than taking out a bank loan. You have the option of replacing the vehicle with a new one every two to four years. Manufacturer warranty is included. You simply hand the vehicle back at the end of the contract. You don’t have all the fuss and hassle of trading in or selling your vehicle. If you lease a car through your business, there are tax benefits. The monthly cost is fixed for the length of the contract. You don’t have to worry about the car depreciating in value because you don’t have to sell it when the contract is over. You simply hand it back.
Cons of leasing a vehicle:
A good credit history is important. You are responsible for all repairs costs if you damage the vehicle outside of acceptable wear and tear. You won’t own the car at the end of the contract. You must pay all monthly payments and will be tied in until the end of the contract. Your annual mileage is limited to the amount specified in your contract. If you exceed this, you’ll have to pay an excess-mileage charge.
Pros of buying a car:
You own the vehicle. If you’re buying the car using Personal Contract Purchase or Hire Purchase, you will own the vehicle once the final payment has been made. Once you own the vehicle, you can sell it at any time. There are no mileage restrictions or excess-mileage charges.
Cons of buying a car:
The vehicle will depreciate in value over time, so won’t be worth as much as you’ve paid. You’ll have to shell out for all servicing and repair costs, and MoT test when the car falls liable. Monthly payments on a bank loan are normally higher than leasing.
Leasing can offer lower monthly payments, depending on the mileage and term you choose, but you won’t own the vehicle at the end of the agreement. Buying a vehicle means you have the benefit of full ownership with no mileage restrictions, but you’re responsible for trading-in or selling your vehicle when you decide it’s time for a change; you will also face the cost of depreciation – every vehicle is different, but a new vehicle will typically lose around half of its value within the first three years.
Keyword: Should I lease or buy a new vehicle?