Car leasing vs buying used cars: which works for you best?
**A contributed post as written for The Safe Driver.
When it comes to making plans to purchase your next car there are more options than ever to choose from but two of the most popular choices are buying a second-hand car, or going for a car lease on a new car – so which works out for the best?
It really depends on your situation and what you are looking for from your car purchase. If you want to own your car outright then clearly you need to look at car finance, a loan, or saving the cash to buy a used car. But if you want a new car then leasing can be a good option.
With a lease you get a brand new car every few years and you don’t have to deal with the hassle of buying and selling. The monthly payments can also be lower than traditional car finance as well, saving you money.
However, buying a used car means you actually own an asset at the end of the loan term, or if you buy it cash, you don’t have any finance commitments and you can sell the car on at a later stage if you choose to, or part exchange it for a new model.
Buying vs leasing – what to consider
Lease agreements often require lower deposits than car finance loans and they also generally come in at lower monthly repayments so if you need the cash in your pocket, then a car leasing scheme might work better for you than buying a used car outright.
How much you drive will have an impact on your decision ultimately. Clearly if you own your car you can drive it as much as you like, but with a lease car, there is usually a mileage restriction per year and if you go over the limit you will be charged for every extra mile when you hand the car back to the dealer.
Another consideration is your lifestyle and how you plan to maintain your car. If you have a chaotic life and your car is likely to get scratched and dirty, then it’s probably best to buy your own vehicle as wear and tear on a lease car will cost you money when you hand the car back to the dealer. If you think your car is likely to get damaged then it’s probably best to stick with a used car.
With a used car clearly you can sell it whenever you want to, so it’s worth thinking about your commitment to the car. If you take on a lease you are committing to a set time period and it can be very costly to try to end a lease early so have a really good think about how flexible your finances are and if you really want to be tied in.
Although, if you buy your used car with a loan or car finance, you will also potentially be tied in for the duration of the loan term, with possible penalties if you pay it back early so it’s worth looking into the two options to compare, before going ahead.
If you use the car for business it’s worth talking through with your financial adviser if there are any differences in the tax claims which you can make on lease car payments compared with car finance/loan payments and what impact that could have on your income.
Generally, on a monthly basis, it works out cheaper to buy your own car; than it does to lease one, but it’s not just the overall payments which you need to take into account.
There are other factors to consider as well. For example, you won’t have to pay any repair costs for your lease car, compared with potentially hefty repair bills on an older second-hand car which can come in unexpectedly.
You also need to look at what your lease includes – some include car insurance for the duration, as well as MOT and regular maintenance – all of which you would need to be paying out of your own pocket on your own used car.
The big factor which leads people to opt for leased cars over used cars is the chance to drive a brand new top of the range car for a lot less than buying it outright. So you get to benefit from all the latest technology and gadgets, as well as enjoying the status of a new car, without the hassle of owning it.
There are benefits to both sides of the car owing coin and it really depends on your personal financial situation as to which one is best for you. It is important to research all of the possible opportunities first, before committing to anything and make sure you can afford whichever option you go for, for the duration of the commitment.