Which is better - buying a car or leasing?
If you are looking to upgrade your car, there are several avenues you could explore. Few people buy cars outright; most buyers spread the cost using monthly payments, but then you need to make the decision whether to buy or lease the car. Car leasing is becoming more popular because it offers some advantages over buying a car on a Personal Contract Purchase (PCP) agreement, but there are some downsides to leasing too. Whether you choose to lease or buy a car on PCP, both types of deals are based on the expected value of the car when you hand it back. This depends on the condition of the car and the mileage you say you will cover while you have the car, and both have extra charges you will need to pay if you do not follow these stipulations. Should you buy or lease your next car?
Buying a car on finance
PCP finance is still the way most buyers choose to pay for their car. The process is more familiar than leasing to many people, and the monthly payments are less expensive than a Hire Purchase (HP) finance deal. Most PCP deals include a deposit, a fixed number of monthly payments and a balloon payment – often called the guaranteed minimum future value. You may be able to choose the deposit you put in, which changes your monthly payments accordingly. At the end of the term, you can hand the car back, upgrade to a new car or pay the balloon payment and keep the car. You can also choose to voluntarily terminate the contract and hand the car back if you have paid more than 50% of the finance due. This makes it reasonably flexible, plus it gives you the opportunity to own the car outright at the end of the agreement. While PCP tends to be a bit more expensive than leasing, you may also be able to reduce the cost by part-exchanging your old car or haggling for a better deal. This is not guaranteed, though, and visiting a lot of dealerships is hardly fun. Once you’ve ordered the car, you may have to wait weeks or months for the car to be built if the dealer cannot find one to match your specifications.
Car leasing
Choosing to lease your car instead of buying it has some benefits. Leasing is the cheaper way to get a new car, so you might be able to get a better car than you would on PCP. It is great if you simply want a brand-new car on your driveway every few years. Car leasing reduces the hassle, too: your road tax is included, the cars are all under warranty so you won’t have to pay to repair faults, and your chosen car is delivered to your home or work. At the end of the lease, you can just hand the car back or start again on a new car. However, there are certain things to bear in mind if you are considering a lease deal. There is no ownership option – you are essentially renting the car – and a lease is harder to terminate before the end of the contract. Should you wish to, it will incur a large fee. Lastly, you may not get to choose any optional extras, but this depends on the lease company. Leasing and buying a car will suit different people. Many customers just want a nice car on the drive and don’t want to pay a lot of money for it, so leasing is a good option. But for some, the prospect of not being able to own the car is off-putting.
