A common question when it comes to car leasing is which is the better option out of buying and leasing a vehicle, and whether leasing a car is a good idea or not. On this page we go through a few different aspects of the leasing vs. ownership debate and the effect each will have on your decision to either buy or lease a vehicle. Before we get into the specifics though, there are some general points that it’s worth bearing in mind when it comes to car ownership compared to car leasing:
With ownership:
- You will own the vehicle and be able to sell it later – but you’ll potentially have to make a large upfront payment to buy it in the first place, and maintenance costs will very likely increase over time – you’ll have to deal with the impact of depreciation as well, as we cover below.
- If you own the vehicle and plan on regularly doing a large amount of miles in it, ownership may be more cost effective in this regard (however, exceeding the mileage cap in a lease deal is a rare occurrence)
- If you feel like (legally!) modifying or making any other changes to the car, you’re free to do so if you own it – with vehicle leasing this is rarely possible.
With leasing:
- The monthly payments are stable and affordable, which can make budgeting considerably easier.
- You’ll be able to switch vehicles throughout the lease term and you’ll always be driving up to date models.
- There’s plenty included if you take out a lease with us here at Flexed – please see ‘The extra benefits’ below.
- There is no hassle involved with selling when your lease expires; you simply hand the vehicle back.
With all the above said, let’s look in some more detail of some specific aspects of both car ownership and car leasing:
The effect of mileage
Whilst leasing, you’re often restricted to a certain annual mileage which can also affect the cost of your lease if higher annual mileages are required. However, the average mileage covered by drivers in the UK often falls between 7000 and 8000 miles per year. This figure is also falling year by year too (down from over 9000 back in 2002).
Taking your annual mileage requirements into account is a great first step to deciding whether to buy or lease your vehicle, particularly if you intend to keep your yearly mileage low. Buying a car doesn’t take this mileage into account and remains the same price regardless of how far you intend to drive. Leasing can work out significantly cheaper if your mileage needs are lower.
Ownership and depreciation
When it comes to leasing, you’ll often hear people say that you will never truly ‘own’ the vehicle, whereas buying a car does give you that ownership. However, that ownership can come at a significant cost.
If you opt to purchase a vehicle through a finance deal, such as HP or PCP, you still won’t own the vehicle until your finance contract comes to an end. Generally speaking, HP (Hire Purchase) can land you with very high monthly payments over a long period of time (often 3 to 5 years on average), giving you ownership only once you reach the end of the term.
PCP (Personal Contract Purchase) will often require you to pay lower monthly payments, but to own the car you’ll have to pay a ‘balloon fee’ at the end of your finance term. This is also known as the GMFV (Guaranteed Minimum Future Value) or final payment which is generally stated at the start of your payment term.
For example, if your car is given a GMFV of £5000 when you begin your PCP contract, you’ll have to pay this amount at the end to take ownership (or you can hand the car back and it essentially becomes a lease deal). There may also be additional admin fees too. Plus, if the car has depreciated in value to the point that your car is worth less than the GMFV, you lose out on even more money at the end of your term.
Options for instant ownership would be to pay outright without borrowing or using a bank loan. However, loans can often leave you with high monthly payments similar to HP.
With a lease, your monthly payments will often work out to be much cheaper than a HP deal and there’s no high final payments or investment loss. Leasing can also give you the freedom to utilise the vehicle over a much shorter period of time than traditional finance purchase options without additional costs or penalties (terminating a PCP deal early can quite often be a costly affair).
Leasing works around your needs
One of the major benefits with leasing is the flexibility of the deals. At Flexed, we strive to deliver a lease experience that works around you. You don’t need to make long-term commitments to drive the car that you want. With us, you can lease a car for any duration of time ranging between just 28 days to a full year. Models are replaced after 6 months too, so you’ll always be driving a new high-quality vehicle.
You get to drive the car that you want for as long as you want. Driving a premium vehicle such as a Mercedes or BMW may be a life-long dream, but the purchase prices of these cars can often make it difficult to achieve. Leasing is a much more affordable way to drive the car that you desire.
The extra benefits
On top of the affordability, the flexibility and the reliable nature of a lease deal, leasing gives you some additional benefits too;
- includes the payment of your vehicle’s road tax, so that’s one less thing to worry about
- 24-hour emergency assistance and vehicle recovery if the worst should ever happen
- vehicle maintenance is included too
These things alone can often result in significant additional costs when owning a car, but you’ll have it all included with most lease deals. You’re getting a lot more than just the car for your money…
If you need any help or have any questions, give us a call on 0800 311 8290 and a member of our friendly team will be happy to assist.