Why leasing a car can be better than buying

A new car is likely to be your second biggest purchasing commitment after buying or renting your home. And it’s a Goldilocks decision where you need to get everything just right.

If you’re wondering whether leasing is a good idea, this article explores why leasing a car can be better than buying.

Why lease a car?

It’s not often you get all of the fun without most of the responsibility. But that’s exactly what leasing can give you: a brand new car that you probably couldn’t afford to purchase outright. And, depending who you lease with, your maintenance, insurance and road tax could be included too.
Alternatively, you could scrimp and save over the next few months or years to buy a new car. But if you’re reliant on an old vehicle, unexpected breakdowns and repairs can be costly, eating into your savings and putting your new car even further out of sight.

Bank loans are another option. Whether your application is successful will depend on your credit rating and whether the bank thinks the amount you want to borrow is affordable.

It’s these challenges that make many people ask, “is leasing a good idea?”

How leasing works

There are lots of different ways to lease a car. Here’s a quick outline of three approaches and their pros and cons.

How leasing works with a hire purchase agreement

Hire purchase helps you buy a car on finance. You’ll need around 10% for a deposit and the loan is secured against the car. Fixed monthly payments are taken over an agreed period and, once the final payment is made, you own the car.

Pros:
• Repayment terms can be flexible, typically between one and five years
• Payments are usually fixed at a competitive rate
• The best schemes are all-inclusive reducing your running costs to fuel only

Cons:
• You often need to save a 10% deposit which could restrict the cars you can lease – look for a provider that doesn’t ask for a downpayment
• Short-term agreements can be expensive
• The car isn’t yours until the final payment

How does PCP work?

This option sits somewhere between buying and leasing a car as you pay an up-front deposit followed by monthly installments. At the end of the term you can hand the car back to the dealer or make a final payment to own the car.

Pros:
• You’ll need a smaller initial payment in comparison to buying
• You can buy your car at the end of the agreement or take a fresh lease and get a new car
• Your monthly payments tend to be smaller as you’re paying for the car’s depreciation

Cons:
• You’ll need a larger deposit than other forms of leasing
• A substantial portion of the amount borrowed is left at the end of the loan
How leasing works through a car benefit scheme

Taking a new car through your company’s car benefit scheme is similar to personal leasing but with added tax breaks that make your salary work harder for you.

Then there are the additional services that tend to come as standard, like breakdown cover, road tax, insurance and maintenance. This can be great for younger drivers whose insurance premiums would be very expensive if purchased privately.

Pros:
• As there is everything you need to run the car (except from fuel and oil) there’s added peace of mind of nothing to worry about with your car
• Collective purchasing power and discounts from manufacturers means lower monthly amounts in comparison to those you can secure by yourself
• Your salary will be reduced each month to cover the lease hire amount and you won’t pay National Insurance on this portion of your salary

Cons:
• Some employers commit to reducing their CO2 levels by putting a cap on the emissions of cars and therefore could restrict your choice of vehicle

How much does leasing cost?

How long is a piece of string? It all depends on:

• the make and model of car you’re looking for
• its engine size
• whether you add on a maintenance package
• the interest rate you’re being charged
• and a whole host of other variables like paint colour and added extras

You also need to consider the cost savings you’ll make as new cars don’t need to have an MOT for the first three years saving you time and money.

To understand how different choices impact the cost, take a look at the deals on offer from a reputable car leasing company.

Is it better to lease a car than buy one?

Whether you join your company’s car benefit scheme or take on a personal agreement, leasing quickly gets you into a new car. Possibly one you might not be able to buy.

Take the Peugeot 2008. It costs around £17,500 brand new, a price that’s out of reach for most people. But lease it via your company car benefit scheme and you’ll pay around £9,900 over three years via monthly payments of around £273*.

Meanwhile, you’ll enjoy driving a slick new set of wheels. And you’ll also know what your monthly outgoings will be because this amount includes your MOT, insurance, breakdown, servicing and any repairs.

Is leasing a good idea?

There are plenty of reasons why leasing a car can be better than buying. From driving a reliable new vehicle to the complete package convenience that some leasing providers supply.

*Quote detail: value displayed is the net monthly cost taking into account Income Tax and NI savings. Based on an employee on £30,000 p/a, who is 40 years of age, on a 36 month agreement, on 10,000 miles, living in area code NP20 4UR. All prices quoted are indicative and can vary as based on a live quoting system.