Why Car Leasing Is Better Than Buying

7 Sep 2020

Here in the UK, car leasing has been constantly growing in popularity over the last few years. It gives you another option compared to having to purchase your new car outright, which can be very expensive.

However, knowing whether it is better to buy a car or lease it can be very confusing to get your head around. There is a lot to consider for either of these, so we wanted to help you understand the differences, looking at the pros and cons of Car Leasing compared to outright purchases.
In this guide, you will find a breakdown of the advantages of leasing your next car, explaining how it can be both the more affordable and the safer option in the long run.

What is Car Leasing?

There was a time when the idea of leasing a car was largely unheard of over here in the UK. It was a massively popular alternative to standard purchases in the United States but hadn’t really made its way over here yet. 
Considering the fact that a quarter of all cars sold in the US were done using Car Leasing, in the UK we were rather sceptical of the idea. Some of the most common misgivings revolved around wanting to own the car yourself, rather than just “hiring” it for an extended period of time. However, those concerns were soon alleviated and now, as we move further into what is known as the Direct Debit Generation, Car Leasing is becoming more and more popular each year.
Car leasing, which is also referred to as Personal Contract Hire, works similar to renting a car when you go on holiday. You “hire” the car for a number of years, paying a set price each month to use it. Then, at the end of the lease period, you hand the car back and move onto your next vehicle.
You will need to pay a deposit, just as you would when renting a car for a short period of time, and will need to look after that car whilst you are leasing it. On top of that, there is usually an annual mileage limit as well. However, this limit varies wildly and you will almost certainly find a car lease deal that covers your required mileage.
By getting a car lease through Personal Contract Hire, you can get the car you really want to drive without worrying about the value depreciating, too! This is because, at the end of the lease term, you give the car back and can then get a new lease and a new car. That way, the depreciation of the car over that period of time is dealt with by the dealer themselves. You don’t have to worry about losing money when you want to upgrade your vehicle.
Unlike PCP or Hire Purchase deals, which take the depreciation of the car or the total cost of the vehicle into account, Car Leasing doesn’t. Because you give the car back at the end of the lease period, you don’t have to worry about either of these at all.

What Are The Benefits of Car Leasing?

We’ve already covered the fact that car leasing allows you to get away from the worry of depreciation, but there are a bunch of other benefits to getting your new car on a lease. This is especially true when compared to purchasing a new car outright.

Low Down-Payment

One of the biggest hurdles when purchasing a brand new car is the initial down-payment, also known as the deposit. If you are buying a car outright, these first payments can be very large, with deposits starting from 20% of the vehicle’s full price being a common sight.
Naturally, this can be a serious roadblock for many, meaning that they have to settle for a vehicle that they didn’t want just because they couldn’t afford that initial payment.
With a car lease deal, the initial payment is typically much lower because you will be giving the vehicle back at the end of the lease period. This means that you are far more likely to get a car that you want since the entry point is much lower.

More Affordable Monthly Payments

When you buy a car outright, unless you have the entire price of the car in cash, you’ll need to get a loan. This can either be done personally before you buy the vehicle or through one of the dealership’s preferred loan providers. Either way, the monthly payments are really important to pay attention to and, like the initial deposit, can often act as a gate to getting the car you really want.
This is because the monthly payments for loans are typically rather high. This is because there is more of a risk due to the depreciation of the vehicle, so the company giving you the loan has to charge you more each month for protection.

On the other hand, lease deals tend to have far cheaper monthly payments when compared to loans. This is because car lease deals do not have to factor depreciation of value into the payments. So, the lower payments once again mean that the barrier to entry is much lower and that you can get a far nicer car for a lower monthly cost!  

More Obtainable With Low Credit Score

When you have a low credit score, getting a loan for a PCP or Hire Purchase vehicle can be excruciatingly difficult. Because the loan provider has to take into account the loss of value for the vehicle, as well as your credit history, the cards are stacked against you. This typically means that you will either have to settle for a cheaper car that you don’t actually want, or not purchase a new car at all.
That’s where car lease deals are better than buying outright. Because the risk is far lower than on a loan for an outright purchase, it is significantly easier to get approved for a car lease than for PCP or Hire Purchase. Even if you have a low credit rating, you will be able to get your hands on a car that you actually want to drive. On top of this, because the monthly repayments are lower than with a loan, they are easier to keep track off. By keeping on top of your monthly payments, not only will you get to drive a nicer car but you’ll also help to build up your credit score.

Typical Lease Deals Are The Same Length As The Manufacturer’s Warranty

One of the most frustrating aspects of owning a car completely is dealing with any faults that occur. Whilst it is true that cars come with a manufacturer’s warranty, this is typically only 3 years in length – anything that breaks after those 3 years is up to you to fix. This can get very pricey, depending on what part of the vehicle has a fault.
When getting a new car on a lease, this problem can be entirely eradicated. A typical car lease deal period is 3 years in length, which also happens to be the exact same amount of time that the manufacturer’s warranty gives you.
Therefore, when you give the car back at the end of the lease period, it is likely just at the end of its warranty as well. This means that throughout your time using the car, you won’t have had to worry about any significant faults as they would be covered by the warranty.
Because of this, it once again makes car leasing far more affordable as you won’t need to worry about the rising costs of keeping the car running.

Low Maintenance Costs

Speaking of keeping the car running, a manufacturer’s warranty covers a lot, but there are other maintenance costs that come with owning a car. Over time, the repairs and maintenance of a vehicle increase in cost, making your car more expensive to run each year. As these build up constantly, it eventually gets to the point where you need to sell your vehicle to get a newer one (which brings up its own issues that we will cover later).
This is not the case with a car on a lease deal. Instead, because you give the car back at the end, it likely won’t get used to the point where it starts to breakdown and suffers serious issues. Instead, you get to experience the joy of driving a brand new car for the length of the lease period before giving it back and then, potentially, starting a new lease with another new car!

No Depreciation Risks

As mentioned previously, one of the biggest positive aspects of getting a car on a lease deal is the fact that you don’t need to worry about any depreciation risks. When you buy a car outright, as mentioned earlier, it will eventually get to the point where you need to sell it because the maintenance costs have become too high to manage.
Herein lies the problem with depreciation – because of the car’s age, mileage and a number of other factors, its value will have fallen considerably. In fact, the most commonly known example of depreciation is that when you drive a vehicle out of the showroom, the value is instantly halved.
So, even if you were to sell that car 5 minutes later, the fact that it is no longer brand new, from the showroom, means you will be losing money.
With a car leasing deal, this entire risk is taken away. Because you don’t actually own the car, the depreciation of the vehicle isn’t your concern. Instead, you are free to enjoy the car at your leisure, upgrading at the end of the lease period without the need to find someone willing to pay a halfway decent amount for your car.

Tax Deductible For Businesses

One more positive aspect of getting a car on a lease deal comes into play when you own a company or are self-employed. Whilst buying a car outright is a cost that you’ll have to absorb entirely, if you lease a car then you can actually include it as an expense for your business.
This means that, when calculating your expenses and filling out your tax return, you can add the monthly payments of your car lease deal. From there, when the amount of tax you need to pay is calculated, your lease payments will be deducted from what you owe. Of course, this just adds to everything else to make car leasing far more affordable and achievable.

How To Get A Car Lease Deal?

So, we’ve covered the benefits of getting a car on a lease deal, but the next stage is how to actually do that! After all, there are a whole host of different providers and deals out there. You need to know what the requirements and what to look for when finding that perfect car lease deal for you.

Credit Score Requirements

As mentioned earlier, even if you have a low credit rating, you are far more likely to get approved for a car lease deal than a Hire Purchase, PCP or loan. That means that leasing a car may actually be the best option for you to get a brand new car.
With that said, it is also worth mentioning that having a good credit score (or higher) means that you’ll be able to find car leasing deals with better rates and monthly repayments. This, in turn, will give you lower monthly costs for your vehicle.
So, whilst the credit score requirements are much lower than with a traditional loan, having a better score will give you more options for which cars and monthly payments you get.

Back-End Costs

It is important to keep the back-end costs of a lease deal in mind when looking around. These come in two main forms; payment for damage and payment for extra mileage.
At the end of the car leasing period, if you hand the car back with damages beyond standard wear and tear, you will need to pay a one-time fee to cover the repairs. This can be a big sting if you’re not prepared for it and haven’t looked after the vehicle.
Then, as every car lease deal has a mileage limit on it, if you go over that limit you will have to pay an additional fee. These extra fees are typically rather expensive, coming in anywhere from 3p to 13p per mile. So, when you are looking to get a lease deal for a new car, pay close attention to the mileage limit.

Where To Find A Car Lease Deal?

Now that we’ve covered the benefits of car leasing, as well as what to keep in mind when looking for a car lease deal, it’s time to start browsing all of the deals available!
Why not take a look through our vast range of car leasing deals here across a host of different makes and models? You will be able to gather all of the information you need to find the perfect new car and an affordable rate per month.