ARE you considering buying a new car? Buying a new vehicle is one of the biggest purchases you will make in your life, so it stands to reason that you should review your options, such as considering is leasing a car better than buying before making your final purchase decision.
Leasing a car, instead of buying one, has many advantages over traditional hire purchase agreements.
Here is a comparison of leasing versus buying your next car. Take some time to think about which purchase model would suit you better.
Considerations for Buying vs. Leasing
If you are wondering which option makes more sense, then let’s take an example of a car with a £30,000 price tag, purchased or leased over a standard three-year term. We shall assume that both interest rates for buying and leasing are the same, at 6%. We shall also assume that you will be driving the industry standard of 10,000 miles per year.
Your monthly income and expenses
The primary benefit of leasing over buying your next vehicle is the monthly expenses. A buyer will have a monthly payment of £700, while lease will be £560. This is a massive difference in monthly payments and the lease wins hands down, saving you £140 a month. That is almost a quarter the cost of the monthly payments on the car, an incredible difference, isn’t it?
There is a reason for the huge difference between the payments is the fact that with a lease you are only paying off the depreciation of the vehicle, not the total vehicle cost.
Do you have enough cash to cover the fees and down payment?
Lease agreements generally have more favorable terms for down payments than buying outright. Leasing a car requires only a down payment of usually three monthly rentals in advance – sometimes less – which is why this option has become so popular.
How much mileage do you drive?
Do you drive a lot? This is a factor to consider when applying for a lease. Lease agreements will generally tie you into a certain mileage, such as 10,000 miles per year. If you drive more than that then you will be liable for a penalty fee for each mile you drive over the set allowance.
The penalty is not massive, at around 10 to 15 pence per mile, however, you should try to keep within the range if you can. While this may sound like a negative for a lease, you should take into account that, similarly for buying, you will be penalised upon trading in your car if the mileage is too high.
How hard you drive
The wear and tear fees written into every lease agreement will penalise you for any dings, dents, and scratches that occur with the car. The total wear and tear fees will generally be limited to a total of three months lease payments.
However, you may want to consider this fact if you are accident prone or have kids that may damage your car. For our example, the total cost of wear and tear fees would amount to a total of £1,680.
Will you drive the car for business use?
With a lease, you will be able to claim some of the car’s depreciation and financing costs against your taxes, as well as other expenses related to fuelling and servicing the vehicle. Interest on loans when buying a car are not deductible in the same manner as a lease.
How long do you plan on keeping the car?
Do you drive a lot? This is a factor to consider when applying for a lease. This should be your final consideration when weighing up a lease versus a purchase agreement. If you have no intention to own the car in the future and will be simply exchanging it for a new one on a new lease, then leasing wins hands down.
Leasing your next car just makes good sense. Too often, car owners get attached to their vehicles and consider them an extension of their personality. If you can get over the allure of ownership and understand that a car is just merely an expense, then leasing will be the best option.
In closing, using a leasing agent that has a positive market reputation, such as Worldwide Automobile, will ensure that you get the best deal possible.