The Ultimate Guide to Leasing vs Buying a Car

The decision between leasing or buying your new car can be a tricky one. There are so many different aspects to compare with each having its own pros and cons, it can be quite easy to get overwhelmed and confused.

The decision of whether to lease or buy a car is an important one that can leave you scratching your head. Luckily, Auto Lease Compare is here to help! This is your ultimate guide to leasing vs buying and by the end of this guide, you should be clued up and ready to make your choice.

How does car leasing work?

Car leasing, also known as Personal Contract Hire (PCH) or Business Contract Hire (BCH), is just like renting anything else. If you rent a house or flat, you pay a flexible deposit, then you use it for an agreed period paying a set amount each month. Once the contract ends, the property reverts back to the landlord.

It’s the same with vehicle leasing - you chose which brand new car you want, how long you want the car for (2, 3 or 4 years), what payment you can afford upfront (normally 1, 3, 6, 9 or 12 months initial payment) and how many miles you think you will drive. Then find fixed monthly payments that suit your budget. It’s a long term rental agreement so you won’t be purchasing the car, you simply return it at the end of the lease term and get another brand new one if you’d like. Simple and hassle free!

The process

1. Search for your perfect car

Compare millions of deals from top leasing companies to find the best price and package to suit your needs. You can compare lease prices quickly and easily here at Auto Lease Compare. Select the make, model, specifications and the payment which suits you and your finances.

2. Send an enquiry or call direct

Through our website, you can send an enquiry or call the leasing company directly (free of charge) to discuss all the details and agree on a personalised deal.

3. Finalise your contract and receive your car

Once you are happy, place your order with the leasing company. The leasing provider’s location doesn’t matter because they will do the hard work for you - vehicles can be delivered straight to your door (free of charge mainland UK) or collected.

4. Pay all your monthly payments and return the car

Pay a set amount each month, generally over 1, 2, 3 or 4 years (depending on the contract length of the lease agreement).

At the end of your contract, return the vehicle to the leasing provider then you can get a brand new lease car if you’d like to.

Is leasing cheaper than buying?

There are a lot of contributors to the overall cost of buying a car, whether this is bought outright or leased. These factors include (but aren’t limited to) whether the car you’re buying is new or used, how long you plan on keeping the car and if you have a good interest rate on your personal loan.

Buying the car outright does initially work out cheaper than car leasing but the depreciation of the car’s value can see you lose money when it comes to selling your car.

Buying a car outright is typically the cheapest option and you have full ownership of the car. However, buying outright isn’t a viable option for everyone and car leasing is a means of spreading out the payments into more affordable chunks.

With car leasing, you don’t need huge amounts of money to get behind the wheel of a brand new car which is a huge benefit of car leasing. When buying a car, it takes a longer length of time to save money before you can meet the purchase price or put down a deposit if you’re buying on finance.

Once you own the car after paying for it outright, you are liable to pay for any costs for unexpected repairs and maintenance and lose money in depreciation when it comes to selling the car in the future. With these factors considered, it can work out a lot more expensive than if you were to lease the exact same car.

Advantages and disadvantages of leasing a car

The debate of leasing vs buying a car is an important one and the advantages and disadvantages of leasing will definitely help you to make your decision.

Advantages

• Cheap and hassle-free - You can drive a brand new car every few years which you never thought you could afford. Once the contract lease period finishes on your lease agreement you can get another brand new car - simple and hassle-free. There's also no hefty financial loan from the bank to buy the car.

• Fixed monthly payment and flexible initial payment - Fixed monthly payments, which are cheaper than buying a car on finance (PCP). You can also choose how much you want to pay upfront (normally 1, 3, 6, 9 or 12 months initial payment). You can also choose how long you want the car for – contracts lengths are normally 2, 3 or 4 years.

• Warranty protection - Manufacturer’s warranty is included with your lease deals free of charge. Most leases let you drop your car off at the garage for no extra cost if something goes wrong.

• Lower maintenance costs - breakdown cover often comes as part of the package (covered under manufactured warranty), servicing sometimes too if you included a maintenance package as part of the agreement.

• No MOT required and Road Tax included - New cars do not need a MOT in the first three years of their life. Road Tax included as part of your lease agreement free of charge.

• Avoid depreciation costs - Avoid deprecation costs if you were to buy the vehicle. This lowers the risk of owning a depreciating asset.

• Free Delivery - Vehicles can be delivered straight to your home free of charge (mainland UK).

Disadvantages

• You don’t own the car - When you lease a car you don’t have full ownership of the car as you’re just essentially renting the car.

• You normally have to arrange your own insurance -  An additional cost to the monthly payments you pay when leasing a car is the insurance that you’re legally required to pay and arrange yourself. We do sometimes however advertise deals with insurance included - these will clearly be tagged with 'free insurance'.

• There is a mileage limit - When leasing a car, you are capped at the mileage you agreed when signing the lease agreement. If you go over this mileage amount there are additional charges.

Advantages and disadvantages of buying a car

Advantages

• You own the car - When you buy a car outright/on finance you own the car whereas with leasing you do not own the car.

• No mileage restrictions - When you buy a car you’re not restricted to the mileage cap that you’re limited to when leasing.

• You can sell your car anytime - If you’ve purchased your car outright, you’re the owner of that car and are free to sell it any time you like and aren’t tied to the car with a contract.

Disadvantages

• The responsibility of tax and maintenance - When you buy a car, the car and everything relevant to the car is your responsibility including any maintenance, MOTs and unexpected repairs.

• Depreciating value - When it comes to selling your car, the value will have depreciated, so you won’t be able to sell the car for nearly as much as you bought it for.

• Monthly payments are usually higher than leasing - If you’re buying the car instead of leasing, the monthly payments are usually a lot higher if you’ve bought the car on finance.

Can Lease Deals Be Exited Early?

Car lease contracts can be exited early by applying for early termination.

Early termination is when a customer wishes to end their leasing contract before the end of their agreed contract length. With an early termination, there is a fee that is to be paid which is set and calculated by the finance provider.

Early termination is at the discretion of the finance provider and is not available on all contracts so this must be checked with your finance provider.

For more information on early termination, there is a useful page here.

Leasing vs Buying: The Summary

Both leasing and buying have their own advantages and disadvantages. Whether it’s most appropriate to buy or lease is dependent on your circumstances and finances. The final answer to the leasing vs buying a car debate comes down to you.

If your finances aren’t up to buying a new car outright, leasing is definitely the better option for you as the monthly payments are much lower for a brand new car, with lots of other advantages as referenced above.

However, one of the main disadvantages of leasing is that you never fully own the car. If you’re wanting to have complete ownership of your new car and not be restricted by a set mileage amount then buying is most likely the better option for you.

Has our leasing vs buying a car guide got you interested in car leasing? We are the UK's leading Car Leasing Comparison Site. Take a look at our current car leasing deals.