Despite rising interest rates, borrowing remains the most popular way for Brits to secure the keys to a new car. Of the different borrowing options available, leasing and finance are two of the most utilised. While both avenues offer a route to your dream set of wheels, they come with unique pros and cons.
Wondering which is better for you? In this guide we’ll break down both and learn more about lease vs finance car options. We’ll spotlight the differences between the two and offer expert tips designed to help you make an informed decision.
Leasing: an up-to-the-minute option
Often called Personal Contract Hire (PCH), leasing is like a long-term rental arrangement. You don’t own the vehicle outright, instead you make monthly payments that entitle you to drive it. At the end of the lease, you hand the car back to the dealer and walk away. This easy and hassle-free approach to driving helps win over many motorists considering leasing vs finance.
The benefits of leasing
Low upfront costs: Leasing typically requires a lower initial deposit compared to financing a car. This makes it an attractive choice if you’re keen to keep your upfront expenses down.
New car feel: With leasing, you’re consistently driving a brand-new vehicle. It’s like always having the latest smartphone model. If you’re the kind of motorist who values next-gen technology, you’ll love this benefit of leasing.
Worry-free maintenance: Maintenance can be a big deciding factor in the lease vs finance car debate. Leased cars are often covered by the manufacturer’s warranty for the duration of your agreement. This means you won’t incur any out-of-pocket expenses when it comes to repairs and maintenance.
Embrace change: Leasing offers the flexibility to switch to a new car every few years. If you enjoy variety, this could be your ticket to trying out different vehicles.
The downsides of leasing
No ownership: What’s the difference between lease and finance when it comes to ownership? At the end of a lease, you don’t own the car. It’s similar to handing back the keys to a rental apartment – you enjoyed it, but it was never truly yours.
Mileage limits: Mileage is important in the leasing vs finance debate. Leases come with mileage restrictions to protect the lender from losing money on their investment. Exceeding these limits can result in additional charges, so it’s important to keep track of your road trips. If you plan to use your car for regular long journeys, leasing may not be right for you.
Wear and tear: As well as mileage limits, you’re also restricted when it comes to wear and tear. While normal use is okay, you must return the leased vehicle in good condition to avoid excessive wear and tear costs.
Finance: a ticket to ownership
Car finance, also known as Hire Purchase (HP) or Personal Contract Purchase (PCP), is like a mortgage for your vehicle. You make monthly payments and once the term is over and all payments are complete, you own the car outright. It’s hugely popular in the UK, with the Finance & Leasing Association estimating around 82% of new cars in Britain are funded by PCP agreements.
The benefits of financing
Ultimate ownership: Financing a car means it’s yours at the end of the term. You take legal ownership of the car and have full control over mileage, wear and tear and resale options. When considering lease vs finance car benefits, ownership is a big factor.
No mileage limits: Throughout your finance agreement you can drive as much as you like, without worrying about mileage limits or excess charges.
The investment angle: While the initial deposit for financing might be higher than leasing, you’re building equity with every payment. It’s like gradually acquiring a valuable asset.
Freedom to customise: The end goal of ownership gives you the freedom to modify and personalise your car without penalisation.
The downsides of financing
Higher monthly payments: Monthly payment size is a key difference between lease and finance agreements. Instalments for financing tend to be higher than leasing, as the final goal is ownership.
Depreciation impact: As the eventual owner, you bear the full brunt of the car’s depreciation.
Maintenance costs: Unlike leasing, maintenance and repairs aren’t normally covered. Instead, you’re responsible for keeping your vehicle in tiptop shape.
Leasing vs finance: which is better for you?
Now that we’ve dissected the differences between a lease vs finance car, it’s time to determine which option aligns with your needs and preferences. Here are some factors to consider:
Options to own
Do you want to eventually own the car, or would you prefer to regularly upgrade to a new model? If ownership is a must, financing is your route. If you’d rather upgrade to a showroom-worthy model every few years, leasing could be a better option.
Consider your monthly budget, capital and payment capabilities when weighing up leasing vs finance. Leasing often offers lower monthly payments, which can be appealing if you’re aiming to keep costs down.
How much do you drive? If you’re a frequent road-tripper, finance might be the better choice as you’re not restricted by mileage limits.
Are you someone who enjoys customising their vehicle? Ownership via financing gives you the freedom to make your car uniquely yours.
Think about your long-term plans when considering the difference between lease and finance cars. Are you comfortable with committing to a car for several years, or do you prefer the flexibility of upgrading every few years with leasing?
Consider your comfort level when it comes to handling maintenance and repairs. Leasing often includes a warranty that covers maintenance, while financing means you’re responsible for upkeep.
Assess your financial stability before making a commitment to either option. Leasing usually requires less upfront cash, making it an attractive option if you’re looking to preserve liquid assets.
The final word on leasing vs finance
Ultimately, the choice between a lease vs finance car hinges on your individual circumstances and preferences. This includes variables like budget, lifestyle and future plans. There’s no one-size-fits-all answer, and what’s best for one person might not be the ideal choice for another. The best way to decide is to carefully consider both options and ensure you understand the pros and cons of each.
Want to know more about you’re the difference between lease and finance? Call us on 01246 458 810 to chat to an auto finance expert or email us at email@example.com.
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