Both leasing and finance present more affordable approaches to owning a car. Each option verges away from the traditional method of buying outright. In either context, once you have found your perfect vehicle and an appropriate matching deal, you drive off happily in your new car.
However, what is the difference between car lease and finance? As the execution of each payment model is quite different, personal preference and demands will inevitably affect the final decision. In this article, we will present the various features that differentiate between leasing and financing a car, so that you can make an informed final decision.
Ownership Of The Vehicle
The main difference between leasing (Personal Contract Hire) and financing (Personal Contract Purchase – PCP) is car ownership. If complete ownership of a car is your preference, financing is definitely for you. Financing is a string of payments that lead to your eventual ownership. In the meantime, while you complete your monthly debits, the lender owns a hold against your car, for insurance purposes. Once the term is complete, the car is yours. The downside to this method is that once you have paid off the car, it’s likely to be valued a great deal less than what you paid for it. On the bright side, you won’t have to rush out to find a new car.
If you prefer being in constant possession of the latest mod cons and tech of the motoring industry, then leasing is ideal for you. Though you never own the car, the opportunity to have the most advanced systems in the market matching your budget is wholly appealing. Think phone-contract-meets-car-rental. The main sacrifice is the initial payment but considering it equates the price tag of a car years older, it suddenly becomes attractive.
Additional Costs Between Car Leasing Or Financing?
Generally, lease payments are cheaper. This is because leasing covers the depreciation cost of the car whilst under your possession. In essence, the lost value of the car is paid for by you. This is one of the factors that sway the inclusion of mileage restrictions in your contracts. On the other hand, with some pre-planning, the penalty costs for going over your mileage can be avoided by ensuring you are agreeing to an accurate mileage figure in the first place. You can gauge a rough estimate by looking at mileage differences between MOT logs.
When it comes to a finance arrangement, you pay both the depreciation of the car AND its buying equity. Monthly payments are inevitably higher. Conversely, on completion of your finance term, you are not presented with additional charges for going over mileage, or for anything else in fact. If you continually lease, though you will always have a monthly debit, you will also never have to face selling the car with a depreciated price-tag.
The More Affordable Car Purchase Option For You?
Though the beauty of both approaches is the ability to have access to a car you desire without the sacrifice of a significantly greater lump sum, the difference between leasing and financing still presents pros and cons. These are, of course, conditional to your demands.
Whilst a lease car allows you to possess a car that would otherwise be out of your financial league, you will never own it (unless you take out a unique leasing deal). The same car might still be too expensive under a finance deal. However, this concern is quickly remedied by the fact you may swap your car at the end of your term with a brand spanking new one. Whatsmore, as part of many leasing deals, you are provided with road tax, roadside assistance and (if you’re really lucky) servicing and maintenance cover.
No such benefits are attached to financing (unless as part of an incentive deal perhaps). Though, financing makes it possible to fully own a specific car you have your eye on. In fact, on the very odd occasion, PCP deals can be competitive against those of leasing. This method is handy if you have the intention of keeping the same car for the duration, or if you wish to keep your options open at the end of the contract. Financing is also the best option if you would like to spend less over a long period of time should you choose to keep the car- once the car is yours you simply pay the usual running costs.
Which Offers The Best Protection?
Your final consideration should be the added protection that your new car comes with, i.e. the level of warranty. This tends to be a perk for those who choose to lease. The reason for this is because manufacturers offer three-year warranty protection on new vehicles, which coincidentally covers the average lease term.
On the contrary, financing does not offer similar protection. For starters, a car on finance is generally one that is nearing the end of the three-year manufacturer’s warranty. Maintenance costs increase as the car ages, and meanwhile, whilst paying off the car itself, you still need to consider the additional payments such as road tax and MOT.
Is Car Leasing Or Car Finance For You?
In a nutshell, car financing is the right option if:
-
You like the idea of keeping your options open
-
You want to keep the car once the contract is complete
-
You don’t want any end of contract faff; you simply drive home in your car
Leasing a car, on the other hand, is preferential if:
-
You want to possess a certain vehicle that would otherwise be inaccessible
-
Owning the latest specifications is important to you
-
You would like greater protection, especially if you continue to lease
The baseline to the question of what is the difference between car lease and finance is that when you lease a car you will always have a newer car. However, when you finance you end up with an older vehicle.
If you require some further inspiration from the leasing side of car ownership, Cars2buy is the perfect place to start. We source the best possible leasing deals on hundreds of cars from nationwide suppliers. Click
here
to find your dream car and perfect leasing deal!