Leasing vs Buying graphic
Ryan Darby

Ryan Darby

Ryan is the Content Marketing Executive at Carparison, keeping you up to date on our socials. He also takes the lead on our fantastic car reviews, and with his experience, is the perfect person to make sure you have all the information you need.

Is car leasing the best way to fund your new vehicle?

Leasing is a fantastic method of spreading the cost of your driving experience over a prolonged period and comes with many benefits when compared to buying a car outright.

The two options are often pitted against one another, with more and more drivers opting to finance their cars over a set contract or agreed term rather than buying outright.

By doing so, you are not making any big upfront commitments and some of our best car lease deals give you greater access to a wide range of brand new vehicles at a affordable monthly cost.

Leasing vs Buying

The main difference between leasing and buying is ownership of the vehicle. When you lease a car, you will never own it. You are essentially renting it from the lease funder under pre-agreed terms and you will return the car at the end of your deal. Buying a car makes you the registered owner of the vehicle and you won't be driving the vehicle under pre-agreed terms. 

Leasing differs from buying because you will never own the car or have the option to do so. You benefit however by not paying for the full value of the vehicle during the course of your lease term, nor having to worry about the resale value. 

When you buy a car outright, it is yours to drive or sell as you wish. There are no annual mileage limits and if you want to sell it after a year, you have the luxury to do so as you see fit. You cannot exit a lease deal early without facing a hefty early termination charge, which is usually a percentage of your remaining payments. 

Excess mileage charges can also be high, but here at Carparison, we offer flexible options, from 5,000 to 30,000 miles per year and everything in between, so there is something to suit everyone.

Looking for a breakdown of car finance options? Read our A-Z of car finance jargon. 

Hand on steering wheel

Is leasing a car cheaper than buying? 

By leasing a car, you don’t need to commit to huge upfront costs or pay for it in one sizeable transaction.

Because you will never own the car you lease, you only pay the value of depreciation for the length of your term. Most terms can run between 24 and 48 months and include an initial rental of anything between the equivalent of one to nine months rental.

The AA believe that a car will lose 60 per cent of its value within three years if you are driving an average of 10,000 miles per year. A quick look at the numbers shows why leasing is proving to be a popular option. If you were to buy a car for £20,000, based on the AA’s research, you stand to lose £12,000 by the time you sell it. 

While it depends on the car you’re looking to buy, the figure you stand to lose in deprecation over time could be higher than the total sum of money you pay throughout a lease deal.

Unfortunately, leasing a car does not prevent it from depreciating. However it does take away from of that financial risk as you know exactly what you're paying. You also benefit by enjoying the freedom to regularly change your car every few years without the hassle of selling privately and all the pitfalls that come with that when you want to move on.

Cash famously used to be king, but having large sums of money tied up in assets - especially in the current climate - is not always desirable. 

In April 2020, The Guardian reported that 9 out of 10 cars sold within a typical year in the UK are paid for using monthly payments on some form of finance plan, rather than buying outright. 

different coloured cars parked up

Can I drive a more expensive car by leasing?

Leasing a car does open up a bigger pool of potential cars, because of the competitive monthly payments, instead of hefty list prices.

With that in mind, you could theoretically lease a car that may have been out of reach if you were buying outright. Each lease application takes into account your affordability, so you will still need to prove you can afford to pay the fixed monthly payments on whichever car you choose. 

For example, taking out a Mercedes A-Class lease, for 48 months at £283 per month, with nine months initial rental at £2545 and a 12,000 annual mileage limit, would cost you a total of just over £16,000 for the four years. To buy a new Mercedes A-Class outright, prices start from at least £24,000. 

*Prices correct at the time of publication and could fluctuate in the future

 

What are the benefits of leasing vs buying?

  • No huge upfront payments
  • No large sums of money tied up into assets
  • Access to the latest and newest models
  • Avoiding the stress of buying & selling previous cars

What are the negatives to leasing vs buying?

  • Mileage limits
  • No opportunity to own the car
  • Requires a good credit score to lease
  • You cannot customise the car
Pros and cons of leasing

There is no right or wrong answer when it comes to how you choose to finance your new vehicle. There are benefits to both and it has to be a question of what is best suited to your lifestyle and what you want from a car. 

If ownership is an important factor for you, perhaps leasing is not the answer. If you value the ability to swap your car every few years for the latest models and don’t want the stress of listing and arranging viewings for your car, leasing is a brilliant method to help you get behind the wheels of a brand new vehicle. Is leasing right for you? Read here. 

Browse some of our best personal lease deals and business contract hire offers today to find a deal that best suits you.