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Is it better to lease or buy a car?

May 2, 2024

Is it better to lease or buy a car?

To lease or to buy? That is the question. And it’s a question many prospective car owners spend some time grappling with before making a decision. As you might expect, there are pros and cons to both options and in this article, we’ll go through the things to keep in mind when you’re making this tricky decision. We’ll also highlight a third possible option that we’d argue is even better than both…

Understanding car leasing and buying

First things first, let’s be clear on what we mean by the two options we’re looking at here. Car buying is when you purchase a vehicle outright, paying for it in full and then having full ownership rights and responsibilities transferred to you. Car leasing, on the other hand, is a kind of long-term car rental, where you have set monthly payments. Some lease agreements give you the chance to buy the car at the end of your term, but otherwise, you hand back the keys. We’ve covered more about this in car leasing explained.

The pros and cons of car leasing

Starting with car leasing, there are some obvious advantages to this model compared with traditional car ownership. These include:

  • Lower upfront costs: although you’ll still need to make a down payment to start your car lease, it’s significantly less than the investment needed to buy a car outright
  • Regular upgrades: most car leases are for two to four years, at the end of which you’ll get the chance to upgrade to a newer model
  • Maintenance may be included: if you’re worried about budgeting for maintenance and unforeseen repairs, you may get some peace of mind from the fact that some leases include maintenance and repair in your contract

Like anything, there are also downsides to car leasing. The main ones are:

  • Mileage restrictions: when you lease a car, your contract will put a limit on the number of miles you can drive each year – and you’ll be charged for exceeding that limit
  • Ownership limitations: unless you make a further payment as part of a Personal Contract Purchase lease, you won’t own the car at the end of your lease
  • Cost considerations: with several hidden costs (as we’ve discussed in our article on how much leasing costs), leasing may work out more expensive in the long run

The pros and cons of car buying

Moving on to traditional car ownership, there are a few obvious benefits to buying a car outright. These include:

  • Full ownership rights: as a car’s official owner, you have complete control over your car, with no mileage limitations and the ability to sell it whenever you choose
  • Long-term investment: buying a car is an investment that should last many years, with no monthly payments (after any loan you’ve taken out is paid off)
  • Do what you want with it: as a car owner, you’ll be able to customise your car to your heart’s content – something you can’t do when you’re only leasing

These advantages need to be weighed up against the drawbacks of owning a car, namely:

  • Higher upfront costs: to buy a car you need to find significantly more money upfront, whether you’re buying outright or putting down a deposit on a loan
  • Depreciation: there’s no escaping the fact that cars go down in value from the moment they leave the forecourt, so unless you choose a model that holds its value, you’ll need to factor in a lower resale value due to depreciation
  • Maintenance expenses: as the car’s owner, it will be your responsibility to pay for all the costs of maintaining and repairing it

How to choose between leasing and buying a car

With clear pros and cons to both leasing and buying a car, there are a few things you can keep in mind when deciding which to go for. Much of it comes down to your circumstances, needs and preferences, and here are some factors that might influence your decision:

  • Financial considerations: money is the number one consideration for most people, with budget limitations and strength of credit score as two of the main factors
  • Lifestyle preferences: things like how often you want to change car (perhaps to keep taking advantage of newer models), how much you use your car and what you use it for (this may affect whether you’d be better off owning a car and not being tied into mileage limitations, for example)
  • Plans: if your circumstances are likely to change in the future – such as starting a family or kids leaving for university – you may want more flexibility and may not want to make a long-term commitment

To help you reach a decision, it’s also useful to compare the total costs of each option across your planned time with the car to work out which option comes out most cost-effective.

The third option: car subscription

When comparing leasing versus buying, it’s easy to forget that these aren’t your only options. A third option is a car subscription, another arrangement where you pay a monthly fee. This has several advantages over both leasing and buying and with a Drive Fuze subscription the main benefits are:

  • All-inclusive: all the costs of running the car are included in the monthly payment, including insurance, tax, servicing, maintenance and breakdown cover
  • Low and refundable upfront deposit: you only pay the equivalent of one month’s subscription upfront, and you get this back when you hand the keys back
  • No commitment: car subscription is flexible, and you’re only ever committed to one month at a time – so you can cancel whenever you like

The best model of car ‘usership’ for you will depend on your circumstances and needs, but if it’s flexibility and simple budgeting you’re after, you can’t beat a car subscription. Check out the cars we have available for a car subscription, and learn more about how car subscriptions work. You could be getting the keys to your new car within a week!