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Buying vs Leasing a Car - Which option is best?

A question that often plagues those driving a car is whether to buy one or lease one. The dilemma is resolved by a comparison of the two options discussed herewith.

buying vs leasing 3

CHOOSING CAR LEASING

Tired of keeping your rusty old banger going? Dread the MOT?

Buying cheap cars can be a risky business, but with no savings/the salary to afford a newer model – you may feel that you have little choice.

Do you yearn to drive a new car but can’t afford the initial expense? Then Car Leasing may be the choice for you.

Check out our ‘Things to Consider’ below to help you decide…

CAR LEASING V BUYING: THINGS TO CONSIDER

IS THE ‘VALUE’ IMPORTANT?

LEASING: Value isn’t a priority concern for the lessee. Leasing means that you don’t take the hit of depreciation, as you don’t own the vehicle that is losing its value. These losses are usually factored into your monthly payments so that the dealer doesn’t feel them either.

 BUYING: A new car often carries with it that niggling feeling that as soon as you drive it off the forecourt – it has lost 20% of its value. It is true that most cars will depreciate in value; but if you love this car and plan to use it for years, is this really a problem?

 If a car does have a good resale value, it is better to buy it outright - if you can afford it of course. Owning valuable assets helps to build up equity and if the vehicle can maintain or even increase its value, then resale shouldn’t be an issue.

HOW DO THE COSTS DIFFER?


LEASING: Leasing gives you the flexibility to drive a new car, changing it every 3 years if you wish, while avoiding the commitment of a large investment. You will need to work out your sums over 3 years (or the length of the lease you are looking at). Can you afford the deposit, monthly payments and insurance?

If you don’t have a great credit score, then the good news is that leasers are more likely to approve you than other finance providers. But of course, a good credit score is always preferable – so it may be worth making sure that your finances are in order before applying.

 It is worth noting that the car lease can be claimed as a tax deduction if you own a business.

Most leasing companies will ask you to declare an annual mileage and if you exceed this limit, then you will incur extra charges – but if you make an educated estimate beforehand then there shouldn’t be a problem.

The biggest downside is – you are simply ‘renting’ this great new car. But many companies do offer you a chance to buy at the end of the lease – if you can’t bear to let it go. And if you fancy a change, you can start leasing a newer model.

Personal Contract Plan (PCP): This involves paying a deposit, then monthly instalments – you will also owe a ‘deferred payment’ when the contract ends if you want to keep it. This flexibility usually means that you pay a bit more than for a hire purchase deal.

BUYING: This requires money in the bank. It will either mean a large cash payment, or monthly payments (usually higher than leasing) that will cease when the value of the car has been paid. Then the car is yours. You can modify or accessorise if the mood takes you and you won’t need to worry about things like mileage limits. Though remember when it comes to resale, any modifications and high mileage will affect the value.

WHAT ARE THE DIFFERENT INSURANCE REQUIREMENTS?


LEASING: Insurance costs for leasing will usually be higher. The leasing company needs to make sure that their asset is protected – so will usually demand that you buy fully comprehensive insurance. As always it is better to shop around for the right deal on a comparison site.The leasing company will also suggest that you take out Guaranteed Asset Protection. GAP insurance is a good way to protect yourself in the event that your new car is written off or stolen before you have repaid the finance – they will pay the pay the remainder of what you owe - so you are not left paying for a car that you no longer have.

BUYING: You are free to choose the right insurance for you at that particular time – i.e. if the car isn’t worth a great deal you may want to lower your insurance by choosing 3rd party, fire and theft only. Annual insurance costs will also decrease over time.

WHAT ABOUT MAINTENANCE COSTS?

LEASING: Maintenance costs are comparatively low. This is usually down to the fact that you have a relatively new car for just 3 years. The leasing company will advise you of any work that needs to be done and you will be expected to keep the car in good condition. It is important to keep on top of this to avoid any additional costs when the lease is over - regular service is a good way to do this.

BUYING: Maintenance costs will tend to increase over time as the car ages, but this is part of car ownership and an investment in your vehicle.

WHAT HAPPENS WHEN I WANT TO CHANGE MY CAR?


LEASING: When your car lease comes to an end, you can simply hand it back to the lease company and then you are free to either buy another car or choose a new car to lease. When giving back your lease car, note that you may be charged upfront for any damage/wear and tear. This will hopefully be covered by the deposit that you paid at the start of the lease – but it is worth bearing in mind.

BUYING: When it comes to selling your car, you will need to search for the best deal to maximise your investment. As we have discussed, it will almost certainly be worth less than you paid for it; but as you own it - you can use it as a trade-in amount to buy a new vehicle.

 In conclusion, if money is no object and you want to purchase your dream car without worrying about depreciation - then buying is for you. If you want to upgrade your unreliable motor to a newer vehicle (with actual mod-cons), but don’t have the excess funds – then leasing is for you.


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Posted on 19th December 2018 at 10:36 AM

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