Is it best to buy or lease a car? We explain all….
Advice from Logbook Loans about the best car deal for you…
So it’s time to change your car. There are so many options around that it can be hard to know where to start. If this is where you are at, then take a look at our recent article Ten Questions to Ask before Buying a New Car to get an idea of how to go about researching cars and narrowing down which is the best for you.
But once you have chosen the car you want, there is then another decision to make. Do you buy it or lease it?
In this article we take a look at the main differences between the two, and the key advantages and disadvantages of each.
Buying a car
Simply put, this is when you pay for a car and it is yours. You either pay all the money up front, or pay it in instalments via a loan. Paying in instalments is also referred to as “HP” (Hire Purchase) or “PCP” (Personal Contract Purchase).
With HP you own the car outright after all your payments have been made. With PCP there is usually a large final instalment (a “balloon payment”) to pay: or at this point you can take another car from the dealer and continue the monthly payment system.
Leasing a car
If you lease a car it is never actually yours, you are just paying to use it. Leasing – or “PCH” (Personal Contract Hire) – includes road tax, and often a maintenance package.
Pros and Cons
So which is the best way to get your car? Buying and leasing both have pros and cons. Here are some of the main things to be aware of:
- You build up equity in the car which means that you can trade it in at some future stage
- The payments are for a fixed period of time and you will then own the car
- The car is yours to do with as you please with no restrictions on mileage or use
- Insurance costs will decrease over time
- You can choose to sell your car at any time or can use it for a logbook loan
- There is often a deposit to pay
- You have to pay road tax on the car
- You have to maintain the car
- New cars lose their value fairly quickly (this is called depreciation)
- There is usually no deposit to pay
- Monthly payments may be lower than loan payments
- No maintenance / road tax / depreciation costs
- You have the option of a brand new vehicle every 2-3 years
- Good tax benefits if you lease a car through your business
- Monthly payments will never stop
- You will never own the car
- Insurance costs are usually higher
- There may be restrictions on mileage and hidden costs if you exceed this
- You are responsible for costs if you damage the vehicle
So, do you buy or do you lease? As can be seen from the above, it really depends on your circumstances and particularly how long you plan to keep your car. As a general guideline, leasing can turn out to be a cheaper option over a short term period – up to three years – whereas buying is more economical if you plan to keep your car for a longer period.
Also bear in mind that if you may potentially need to use your car for a logbook loan at some stage, then you will need to own your car. So from that point of view, buying rather than leasing could turn out to be a better option.
But the choice is yours!
Check back here soon for more financial and lifestyle tips from Logbook Loans.