If you’re looking for a new car, the first thing you’ll need to decide is whether you plan to buy or lease your next vehicle.
The best option for you will depend entirely on your circumstances. Buying and leasing both have their advantages and their disadvantages. By finding out more about each option, you can make an informed decision about what makes the most financial sense to you at this moment in time.
In this article, we will explain more about the differences between buying and leasing and the costs involved with each option.
What is the difference between buying and leasing a car?
The key difference between buying and leasing a car is ownership.
When you buy a car, no matter whether you’re buying new or used, you own it after you have purchased it. This means it is then your responsibility to arrange and pay for all the relevant expenses associated with owning and driving a car, including tax, insurance, maintenance, repairs, and breakdown cover. You then get to keep the car until you no longer want or require it, at which point you must arrange its sale. When buying a car, you can either buy it outright if you have the money to do so, or you can take out a loan and pay for the car in instalments.
In comparison, when you lease a car, you never own it, and at the end of your lease, you are required to return the vehicle. Leasing companies offer a wide range of different vehicle types, makes, and models to choose from. When leasing a vehicle, you must select a vehicle and a lease deal. The lease deal lays out the terms of the lease agreement including details like the length of the agreement, monthly costs, mileage limits, and any running and maintenance expenses that are included in the deal. When you lease a car, instead of paying one lump sum, you pay an affordable, fixed, monthly cost to the leasing company to rent the car from them.
What are the costs involved with buying a car?
If you’re considering buying a car outright, then it’s important to ensure that you are well-informed about all the costs involved so that you can budget accordingly.
Buying the car alone is a very big purchase, but you then also need to consider all the additional costs that are required to get your car up and running.
The main costs involved when buying a car are:
Cost of vehicle – The cost of the vehicle can vary dramatically depending on whether you are buying a new or used car and the make and model of the car you choose.
Insurance – Insurance is another major cost to consider when buying a car. The price of insurance depends on a variety of factors including your age, driving experience, whether you’ve made any claims before, the insurance provider you choose, and the type of car you’re insuring. Always get some insurance quotes before buying a car so that you know how much to budget for insurance.
Tax – Road tax can cost anything from £0 to £2000 per year, so make sure you know which tax band a car is in before you purchase it to ensure that you’ll have enough budget left to tax your new vehicle.
MOT – Your new car will need to have an MOT once every 12 months unless it is a brand-new car, in which case you won’t need to pay for an MOT for the first three years. If you are buying from a private seller, you should always check when the car’s MOT is next due. An MOT usually costs around £55, but then you should also budget for any repairs or maintenance the car may require.
Breakdown cover – Buying breakdown cover is not mandatory, but it is an additional cost that many people choose to take on when they buy a car to give them peace of mind.
Depreciation – Another less discussed cost that you should bear in mind when buying a car, particularly a brand new one, is the cost of depreciation, which is the amount of value that a car loses during the time that you own it.
What are the costs involved with leasing a car?
In comparison, the cost of leasing a car is quite simple.
When you first take out the lease on a new vehicle, you will usually be required to pay two one-off fees, an admin fee, and an initial rental payment. The cost of the initial payment is usually set at somewhere between 2 and 12 months of lease rentals. The more you pay at this point, the lower your monthly payments will be.
Then, all your ongoing expenses are included in your monthly lease charges. When you lease a car from our team here at LetsTalk Leasing, the costs included in your monthly lease charge are:
- The cost of financing the car.
- Vehicle registration.
- Vehicle delivery.
- A full manufacturer warranty.
- Maintenance costs (optional extra).
Maintenance costs are not included in the monthly lease payments as standard but can be added.
Is it cheaper to buy or lease a car?
If you have the cash to buy a car outright without taking out any loans then you will save on interest, but you could be forking out a very large lump sum depending on the type of car you’re buying. Then you need to carefully factor in the cost of depreciation and any maintenance and repairs the car may need over the years. Whilst you are likely to spend less on repairs with a brand-new car, you’ll likely lose a lot more through depreciation.
If you choose to lease, you won’t have a car to sell at the end of a lease rental, but you won’t have lost any money through depreciation either. Monthly lease rental costs are usually very affordable and give drivers access to brand-new cars that they otherwise may not have been able to afford.
Both options have advantages and disadvantages and the right option for you usually comes down to your personal circumstances and the type of car that you wish to drive.
Why should you choose LetsTalk Leasing for cheap car leasing?
Here at Let’sTalk Leasing, we are proud to be one of the top cheap car leasing companies in the UK. We offer leasing deals for any requirements and budget. Search over 12,000 cheap car leasing deals on our website or speak to one of our friendly advisers by calling us on 0330 056 3331.