There are two options available to consumers looking to purchase a car. Both leasing and buying have their advantages and considerations, and understanding the benefits of each option can help you make an informed choice that aligns with your needs and financial situation. For many, buying a car outright for cash may not be an option, however, the cost of buying a car can be spread out through financing agreements, making purchasing more affordable for more people. Leasing a car is an often overlooked option, but can in many circumstances be more suitable than purchasing the vehicle. 

We explore both options in this article to help you make the best decision as to which is best for you.

Leasing a Car

Leasing a car involves entering into an agreement with a dealership or leasing company to use a vehicle for a specified period, typically two to four years. During this time, you make monthly payments, and at the end of the lease term, you return the vehicle. Some of the benefits of leasing include:

1. Lower Monthly Payments: Perhaps the main advantage of leasing a car is the lower monthly payments compared to buying. When you lease, you are essentially paying for the depreciation of the vehicle over the lease term rather than the entire purchase price. This can make leasing an attractive option for those who want a newer car with lower monthly financial commitments.

2. Warranty Coverage: Most leased vehicles fall under the manufacturer’s warranty, which means that any covered repairs or maintenance costs are typically taken care of by the dealership. This can provide peace of mind and potentially save you money on unexpected repairs during the lease term.

3. Ability to Drive Newer Models: Leasing allows you to drive the latest models with the latest features and technology. Since lease terms are usually shorter, you can upgrade to a new vehicle more frequently without the hassle of selling or trading in your car.

4. Limited Financial Risk: When you lease a car, you are not responsible for the vehicle’s future resale value. Once the lease term ends, you can simply return the car to the dealership without worrying about its depreciation or market value.

Buying a Car

Buying a car involves outright purchasing the vehicle, either through financing or paying the full amount upfront. Here are some benefits of buying a car:

1. Ownership and Equity: When you buy a car, you become the owner, which means you can modify or customise the vehicle to your liking, something you can’t do when leasing. Additionally, as you make payments towards the purchase, you build equity in the car, and eventually, you will own it outright.

2. No Mileage Restrictions: Unlike leasing, buying a car allows you to drive as much as you want without worrying about mileage restrictions or excess mileage charges. This is ideal for those who have long commutes or frequently travel long distances.

3. Freedom to Sell or Trade-In: When you own a car, you have the flexibility to sell it or trade it in at any time. This can be advantageous if you prefer to change vehicles frequently or if you need to get rid of the car for any reason.

4. Cost Savings in the Long Run: While buying a car may result in higher monthly payments compared to leasing, over time, the cost of ownership can be more economical. Once you’ve paid off your loan, you no longer have monthly payments, and you can enjoy a period of payment-free ownership.

What’s the verdict?

Your personal situation will dictate which is the better option for you. For anyone who plans on using their car a lot and will want access to it over a long period of time, buying will generally be the better option. Buying allows you more flexibility when it comes to mileage, customisation, and will make more financial sense in the long run.

On the other hand, leasing might be the better option for someone who uses their car more infrequently and may not need a car long-term. For example, someone who did not live permanently in a given country may prefer leasing due to the simpler process and lower responsibility of taking on a vehicle as a full-on purchase. 

Sensible Car Finance is a broker service offering advice on the best car finance package for you.