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Is it a good idea to lease a car?

May 8, 2024

Is it a good idea to lease a car?

Car leasing has been popular for a good couple of decades now, and it continues to be a major alternative option to buying a car. But the decision to lease isn’t necessarily a straightforward one, as it’s a model of car ‘usership’ that comes with as many cons as there are pros. We’re looking at the benefits and drawbacks of car leasing to help you come to an informed decision.

Understanding car leasing

Before we delve into the pros and cons of leasing a car, we should begin by being clear about what we mean by ‘leasing’. A car lease is when you rent a car for a prolonged period, usually between two and four years, during which you’re bound by agreed mileage limitations and make fixed monthly payments. 

At the end of the rental term, depending on the type of agreement you’ve signed, you either hand the car back, buy it outright with a closing payment, extend the lease or trade it in for a new model on a renewed lease. Leasing has become a popular alternative to buying a car, as it allows you to spread the cost month by month instead of finding the money upfront.

The pros of car leasing

Car leasing has several advantages over traditional car ownership, and these include:

  • Lower upfront costs – while you’ll still need to pay a deposit at the start of your lease, it’s typically much lower than the cost of buying a car outright. Monthly payments may also be lower than loan repayments taken out to buy a car.
  • Driving newer vehicles – leasing is a more affordable way of having access to the latest car models, without the expense and depreciation that comes with buying a newer car. A new vehicle is less likely to have issues, and you don’t need to worry about MOTs until it’s three years old.
  • Warranty coverage – most standard car leases give you warranty protection to cover any maintenance the car needs during your lease term.
  • Predictable expenses – although you’ll still need to budget for fuel, insurance and other running costs, the fixed monthly payments make budgeting easier when leasing, particularly without unexpected repair costs.

The cons of car leasing

There are a few drawbacks to leasing to keep in mind if you’re thinking about this option. These may include:

  • Mileage restrictions – most car leases will impose a mileage limit, and you’re likely to have extra charges to pay at the end of the lease if you go over it.
  • No ownership equity – unlike when you buy a car, your monthly payments in a car lease aren’t building equity towards ownership rights over the vehicle. At the end of the lease, unless you opt for a Personal Contract Purchase, you won’t own the car and you’ll have to hand back the keys or renew the lease.
  • Long-term cost – it’s important to compare your options in terms of the total financial outlay across the term of the lease relative to buying a car outright, as leasing may work out more expensive.
  • Early termination penalties – sometimes circumstances change and you may no longer need the car you’re leasing, but trying to get out of a lease early may mean you’re liable to pay significant fees and penalties.

Is a car lease right for you?

The question of whether leasing is the right option for you ultimately comes down to your circumstances, and you should weigh the pros and cons we’ve discussed here against your own needs, preferences and goals. Some of the factors you might want to think about are:

  • Your financial situation – will you be able to afford the monthly payments, not just now but for the duration of the contract? Do you have a good enough credit rating to be approved for a lease agreement? Will being tied into a lease for two to four years affect your future financial goals?
  • Your driving needs – will the mileage limitations of a lease conflict with your planned use of the car? Will the type of car and the features you need be affordable on a lease?
  • Your plans: you may need a car – or this type of car – today, but will you still need it in three or four years? A car lease means you’re stuck with the car until your lease ends, so think about whether your circumstances are likely to change.

If you do decide that car leasing is the right way forward, we’d recommend a detailed cost comparison of the true costs of leasing versus buying a car, factoring in ‘hidden’ expenses such as depreciation and interest on finance. Always read the lease terms and conditions carefully before signing anything, making sure you understand any potential fees to pay both initially and at the end of the contract. It’s also important to understand what happens at the end of the lease – do you have any buyout options, can you extend the lease, or do you have to return the vehicle? If you’re not sure, it’s never a bad idea to ask an automotive expert or financial advisor for some guidance.

Car subscription: a better option?

Finally, if you don’t want to commit to buying a car, it’s also worth evaluating other types of car ‘usership’ where you make monthly payments. A car subscription, as we offer here at Drive Fuze, is another possible option. It gives you the benefits of a car lease – low upfront payment, newer vehicles and predictable expenses – but with a much greater degree of flexibility. You can cancel or switch cars at any time, which is great if your circumstances change, and unlike a lease, all the running costs are rolled into your monthly payments. No more trying to budget for maintenance, insurance, tax, tyres and breakdown cover! Read more about car subscriptions and browse our subscription cars to see what you could be driving in as little as a week.