Published On: Tue, Sep 8th, 2015

Is It Cheaper To Buy Or Lease Your Next Car? We Investigate

Strolling through the car dealership, you’ll often see two different prices on the car window. The first is usually extortionate, and way out of your budget. But the second might just be affordable. The first price is the cost of buying a brand new car. But, what exactly is that second monthly price? Well, it’s the cost of leasing the vehicle. And there’s a good reason why the lease payments are almost always lower than the cost of buying the car. If you’re in the market for a new vehicle, leasing might just be the answer you’re looking for. Why? Well, it’s cheaper, more flexible, and much less hassle.

Ford Fiesta 2009

If you’ve never heard of leasing before, think of it like a long-term rental. Essentially, you’ll hire the vehicle for an agreed period (typically three years), paying monthly payments for the pleasure. At the end of the contract, you’ll simply hand the keys back. It’s as simple as that. Of course, there are one or two conditions. You’ll be restricted to a certain mileage limit, and there are fees for wear and tear over the term. However, servicing and maintenance is often included.

As you can see, there are numerous benefits here. It often means you can afford a newer model or the bigger upgrades. Leasing means you can driver the newest cars and the better models. That’s because the monthly payments are usually lower than the loan repayments when buying. Best of all, in three year’s time, you can switch it for another upgrade.

Having said that, there are some downsides. As with any car financing option, there is never a clear-cut winner. Any decision revolves around you and your lifestyle. It also depends on the type of car you’re looking at. The biggest downside with leasing is that you never actually own the car itself. You can’t sell it when you’re looking to trade it in later. You also can’t make any modifications or upgrades. If you want a bigger stereo, sat nav installation or parking sensors, the choice is out of your hands. Finally, there are limits and restrictions that can be quite tough. These are usually mileage limits, and going above those restrictions will incur a heavy fine.

So, let’s get down to the crux of the issue. Is leasing actually a cheaper option? Well, I’m afraid it all depends on the car you choose, and your lifestyle factors. As an example, let’s take a look at a Toyota Rav 4, available here. On this particular lease, you’d save roughly £4,000 over the six-year term. (Prices compared against the £22,000 brand new price-tag). So, the moral of the story here is to do your sums! Other cars demand a much higher lease price, and could eclipse the buying price.

As a general rule, cars lose money. They depreciate, meaning you lose a huge chunk of the value (usually more than half) in the first three years. Do your sums, and ask yourself if it makes more financial sense to lease it for those three years instead. More often than not, you’ll discover that it is.