If you're looking for a new car but can't decide how to pay for it, don't worry. There are lots of different options, but in 2020 the big decision is between leasing or buying a vehicle. Read on for the pros & cons of leasing & buying to see which is the right option for you.
Why Is It A Good Time To Lease A Car?
In the current economic climate, certainty is something all customers want. Before you commit to a lease, you'll receive a breakdown of exactly what the monthly costs are & when you'll need to pay them. This means there are no hidden costs to consider & in the current uncertain economic climate, the peace of mind leasing offers is one of the top reasons to do it.
Leasing from Vanarama guarantees you will get a brand new car that is less likely to require any work or maintenance - it's brand new, it won't need an MOT for the first 3 years of its life & will come with a full manufacturer's warranty - road tax is also included in the monthly rental payments so you won't have to worry about that either.
Finally, when you lease with Vanarama, you'll also get Redundancy & Life Event Cover* included with your lease. This unique level of cover provides you with additional peace of mind giving you the confidence to lease a vehicle knowing that, should the worst happen & your employment or life circumstances change, you won't be charged for the costs of returning a vehicle.
What Are The Pros Of Leasing A Car?
The benefits of leasing a car include:
Low fixed cost monthly payments
Upgrade to a new car every few years
Manufacturer warranty & tax included
No need to worry about depreciation
No need to sell on the car
A New Car Every Few Years
If you like driving a new car every couple of years but don't have the cash to buy outright, leasing is the obvious choice. Contracts normally last between 2-5 years, so you can pick a different car every time you take out a new agreement.
You can choose between a wide selection of makes & models too. You could be driving a new Audi & then in a few years opt for a BMW.
Plus, as electric cars become more popular & emissions rules change, driving a new car every couple of years helps you stay ahead of the curve & save more money. Changing up your vehicle to keep emissions low will reduce your VED road tax, because the lower the CO2, the lower the tax cost.
You will also get access to the latest automotive technology by leasing the newest cars. This doesn't just enhance your driving experience, but ensures you have the most up-to-date safety features.
Lower Fixed Payments
Lease payments are fixed – you will make the same monthly payments for the duration of your agreement. The amount will be settled on before your contract begins, so you'll always know how much to pay. If you're conscious of your budget, car leasing can help you manage your money.
We also have excellent relationships with car manufacturers & dealerships, so we can offer better prices on our lease deals.
Manufacturer's Warranty & Tax Included
All new lease cars come with a manufacturer's warranty, which normally lasts for 3 years or more. Most mechanical faults will be covered in this warranty, so you won't need to shell out. Other routine repairs & replacements will also be covered with a maintenance package.
Contract Hire leases include tax as part of the monthly payment, so there's no need to worry about taxing your vehicle at all.
No Need To Worry About Depreciation
All cars will depreciate. This means any vehicle's residual value – specifically, how much it will be worth after a certain length of time – will decrease as you drive it. With leasing, the depreciation costs are already factored into your car rentals, so you don't need to worry about this at all.
Avoid The Hassle Of Selling It Later
At the end of the lease term, you simply return the car to your finance company. You don't need to think about its resale value or how to get a good price from another buyer.
Cons Of Leasing A Car
Monthly Payments Must Be On Time
If you miss 1 or more of your monthly lease rental payments, it may be considered a breach of your agreement. Missed rental payments could affect your credit score and the car could be removed from your possession.
Always contact the leasing company if you think you're going to miss a rental payment. They will come up with a solution that takes your financial situation into account.
The Car Must Be Kept In Good Condition
At the end of the contract, your lease vehicle will be inspected by the dealer. We would never expect it to be returned in perfect condition, as you could have been driving for up to 5 years. But if the car has been seriously damaged, you will be responsible for the repair costs.
All leasing companies should follow the British Vehicle Rental & Leasing Association's (BVRLA) Fair Wear & Tear guidelines, so you won't have to pay for a minor scuff or light damage. However, if you cause a large dent or an excessive scratch you will be charged.
Charges For Exceeding Your Mileage Limit
Leasing agreements are calculated based on the car's residual value. The more miles you drive, the greater the vehicle will depreciate. If you exceed your agreed mileage, you will be charged for the additional depreciation which is priced as a specific pence-per-mile cost.
If you think you're going to go over your mileage allowance, contact the lease company so they can try & extend the deal for you. Or better yet, try to overestimate your mileage before the agreement begins so you don't get charged.
Cancellation Fees If Your Circumstances Change
If your circumstances change & you no longer need the lease car (or can't afford it), it can be expensive to get out of the contract. The cancellation charge for leasing is normally 50% of the remaining monthly rental costs. So, if you're paying £300 per month & have 1 year left in your contract, the termination fee will be £1,800.
Speak to your leasing company if you can't afford the car anymore & they will help you work out what's best to do.
You Will Not Own The Car
Leasing is essentially another word for renting. You are only renting a new car for a set time & will not own it at the end of your contract.
However, that does mean you won't need to worry about expensive maintenance costs. As all our lease cars are new & contracts last a maximum of 5 years, the car will be more reliable than one you've owned for 10 years. That's why it can be cheaper to lease a car, plus you can drive a shiny new vehicle every few years.
Pros Of Buying A Car
No Mileage Limits
When you own the car, you won't be restricted by a mileage allowance. Drivers who go over 50,000 miles annually may be better off buying to avoid excess charges.
Remember that some lease agreements can exceed the 50,000 limit, so if you don't want to buy a car, contact the leasing company who will do their best to work something out for you.
If you want to modify your car's performance or change its look, you should buy the car. With leasing, the vehicle needs to be returned in the same condition when you first received it, minus the expected wear & tear. With buying, your car doesn't have to stick to the original factory specifications – you can customise it however you like.
Resale Or Trade-In Value
You can resell your car & get some money back if you're tired of your current vehicle. Obviously, you won't get the full amount, but it can help you put a little more cash towards another car.
You could also trade-in to another dealer & get money off a finance deal, but you'll make more money than selling it privately.
No Credit Checks If You Pay Upfront
When leasing, the finance company will need to check your credit score to make sure you can afford the payments. If you have a poor credit history, then you may be offered a higher interest rate. However, when you buy outright, you won't need to pass a credit check & can hand over the cash without your financial history being looked at.
You Own The Vehicle
The main benefit of buying a car outright is that you become the legal owner. It's yours to keep until you sell it or it's no longer roadworthy. You will also be debt free if you can afford to pay the entire amount upfront.
However, bear in mind that when you own a car, you are solely responsible for the additional costs. You need to pay for road tax, tyres, MOTs, servicing & maintenance (which will get more expensive over time). Car ownership may only be beneficial if you're able to pay these costs upfront.
Plus, when your vehicle is too expensive to repair, you will need to replace it, which can be a surprise cost if you weren't already aware of the damage.
Cons Of Buying A Car
Large Outright Cost Or Higher Monthly Payments
Private sellers will want you to pay the full cost of the car on the spot. Expect to pay thousands of pounds if you purchase a car, which is a lot to hand over all at once.
As an alternative, you could get a personal car loan, but the monthly payments will generally be higher than the cost of a lease contract.
Uncertainty About The Previous Owner
If you buy a car from a private seller, you risk some uncertainty with the vehicle's history. Your purchase is less likely to be protected, so if you're ripped off it will be hard to get the money back.
If you do buy privately, ensure to carry out thorough checks: do a full test drive & always go through the car's paperwork. If it's a used car, an HPI check is also recommended.
Maintenance Costs Will Increase
Once your car's warranty is up, you are liable for repair costs. As your car gets older it will need additional maintenance, which can be expensive. Don't forget the cost of annual servicing, MOTs & tyre replacements too.
You will also need to spend time finding a garage that will deliver high-quality work on time (so you aren't without your car for long), plus shopping around for a fair estimate.
Unpredictable Depreciation Value
All cars depreciate differently & you can't always accurately predict how much your vehicle will be worth in the years to come. New cars can depreciate between 20-60% over a 3-year period but this isn't exact, so you might find yourself losing out when it comes to selling.
You Need To Sell It Yourself
If you own your car, but change your mind after a couple of years you will be tasked with finding a buyer. It can be a hassle to sell your car privately, but it is the best way to make the most money. If you want a quick sale, you will need to reduce the price or trade-in your vehicle.
Is It Cheaper To Buy Or Lease?
If you prefer driving a new car, leasing is cheaper because you only drive the vehicle for a set time & don't pay for its full value. Lease contracts are usually cheaper than personal loans too, plus you can include maintenance as part of your monthly rentals.
If you buy a used vehicle, it can be cheaper than a lease – if you have the cash to hand. Don't forget to factor in expensive maintenance costs though.
Leasing Vs. Buying – Which Is Better?
If you like driving a new car every few years & you're willing to keep it in good condition, leasing is a great choice. On the other hand, you should consider buying if you want to own the car & modify it.
If you're looking for an affordable way to drive your next car, find a lease deal today. We have a great range of vehicles available, with the best value guaranteed in our Price Promise. Or if you want to know more about the leasing process, learn how it works in our 8-step guide.