Leasing is an ideal option when you are running a fleet of cars, or you love to enjoy driving new models every so often. However, buying a car is a suitable option for those seeking ownership.
Buying a car outright seems quite an expensive option. Few people actually manage to have sufficient money to pay for a car outright without taking out a car finance deal. Most of the people rely on auto loans and car finance deals, such as hire purchase and personal contract purchase, to buy a car. These options spread the cost, although they require you to pay more than the car’s value.
If upfront dissuades you, leasing should be the best bet. You do not have to fork out a large sum of money upfront when leasing. This is what makes it an appealing option to many borrowers.
Leasing is like a long-term rental. In other words, you rent out a car for a specific period of time and pay a fixed sum of money every month until the contract ends. After the contract ends, you will have to return the car and pay additional money for exceeding the mileage recommended in the contract.
However, if you are planning to buy a car, you need to make a large deposit. Whether you use a personal loan or hire purchase, it is mandatory to pay some money down up front.
There are three ways you can purchase a car:
Personal loans
Hire purchase
Personal contract purchase
Both financing options include monthly payments to cover the depreciation of a car, and both options will charge you extra fees for exceeding the mileage. Yet, they differ from each other.
Leasing is a strict rental agreement. Monthly instalments you pay include fees as well. You cannot own the car at the end of the contract. You will need to return it.
However, a personal contract purchase allows you to purchase the car. Leasing has lower monthly payments than a personal contract purchase. Further, you do not have to worry about your car’s negative equity.
Buying is a better alternative than leasing when it comes to ownership and mileage restrictions. You do not have to worry about mileage. No additional fees will be imposed, whether you use auto loans or hire purchase.
Leasing does not include ownership. You have to return the car to the lessor, and therefore, mileage is capped. If you have taken out a personal contract purchase, you will have the option of owning the car, but it will prove to be much more expensive than personal loans and hire purchase due to a massive lump sum payment. Experts recommend personal contract purchase only when you plan to trade in for a new car or return the car and close the deal.
Leasing does not provide you with much flexibility. You will have to adhere to the contract. If you want to end the leasing contract before the time, you will have to pay hefty penalties. Fortunately, you do not have to be concerned about fees and penalties when you purchase a car.
You can sell the car at any time you want, but you will have to pay off your car loan in full. Since hire purchase does not transfer the title of the car until the end of the contract, you do not have the option of selling it until full and final payment.
Personal contract purchase provides three options: either you can trade in a new car, or you can return the car, or purchase it by making the balloon payment.
Leasing does not admit of customization and modifications. You rent out a car when you sign a lease agreement. You will need to return it to the lessor in the original condition.
However, when you purchase a car, you can modify it, add accessories, or upgrade the sound system. If you have signed a hire purchase or personal contract purchase, you can customize or modify your car only after getting the title.
Leasing is the right option when you:
It depends on your needs whether you should consider leasing or buying. Leasing usually helps save you money as you pay only towards depreciation and finance charges.
However, buying is a better option despite a high upfront cost if you drive several miles almost every day.
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