When it comes to choosing a new car, you have two options: to buy or to lease. However, which option is best for you?
What is leasing?
Leasing a car is a way of paying for the use of a vehicle for a set amount of time. It is essentially the same as hiring a car, although leasing lasts for much longer than hiring. At CarSite.co.uk, we offer leases ranging from 3 months to 5 years -- go to our leasing page to view our deals. When you lease a car, you're not buying it - the leasing company will still own the car and you will be paying to use it.
How does leasing work?
To understand how leasing works, you have to understand the concept of depreciation. That is, the amount of money by which the value of a new car falls over a given period of time.
When you lease a car, your payments are based on how steeply the car depreciates. Let's take the example of a car which costs £20,000 new and is valued at £12,000 after three years:
New price: £20,000
Value after three years: £12,000
Cost of depreciation: £8,000
In this case, the cost of leasing the car for three years should be roughly £8,000. If you were to buy the car yourself, you would still be paying for this depreciation but you would also be paying for the cost of the car. To find out how quickly a car depreciates, visit our used car price guide.
However, it's not quite this simple. Leasing companies often get huge discounts on the new cars they purchase and they pass this saving on to the consumer. A heavily discounted car will lose less of its value and will therefore be cheaper to lease.
You'll see leasing deals expressed as a number such as 3+35. The first number is the number of months you must pay for up front. The second number denotes the length of the lease in months. In this instance, you will pay three times the monthly fee up front and the standard monthly fee for the subsequent 35 months.
So, is it cheaper to lease?
To give you an idea of how leasing can work out cheaper, take these real-life examples:
Fiat 500 1.2 Pop 3dr |
Ford Fiesta 1.25 Edge 3dr |
|
| Price (New) | £9,960 | £10,995 |
| Value after 3 years | £5,995 | £4,232 |
| Cost of depreciation (3 years) |
£3,965 | £6,763 |
| Lease term | 6+35 | 3+35 |
| Monthly lease cost | £167 + VAT | £129 + VAT |
| Total lease cost (inc. VAT) | £8,216.40 | £5,882.40 |
| Lease saving | -£4,251.40 | £880.60 |
| Buy or lease? | BUY | LEASE |
(Prices correct at time of writing)
As you can see, leasing is sometimes cheaper than buying and vice versa. As a general rule, the more expensive a car is, the more likely that it is to be more cost-effective to lease. To work out whether leasing is a good option for you, go to our new cars page to find out the cost of your car, and then go to our used car price guide to check its depreciation. You can also visit our lease page to find out whether leasing stacks up financially for you -- we offer personalised lease quotes tailored to your needs so you can accurately assess the cost of leasing.
The most important thing to remember with leasing is that the deal is king. Be prepared to shop around for the best deal and bear in mind that a slightly different car may be significantly cheaper to lease than the one you are looking for.
What's included in the terms of my lease?
Good question. Different leasing companies offer different deals so it's a good idea to read the small print before you buy. You can also look at our deals to see exactly what you're getting for your money. Generally, the leasing company pays your vehicle excise duty for the duration of the lease, saving you money. A maintenance pack can also usually be added for a fee, which will ensure your car stays in good condition. Also, when you lease a car you're getting a brand new vehicle, so the car will be supported by a manufacturer's warranty which should cover you in case anything goes wrong.
Is leasing a good option for businesses?
The short answer to this is yes. Business leasing is an excellent option as it is extremely tax-efficient and, thanks to the low initial deposit, very good for cash-flow. With leasing, you're not spending precious capital on a fleet of new cars, making it a very cost-effective way to run a fleet of vehicles.
The fixed monthly cost of leasing a vehicle makes it ideal for business users as the costs associated with running the vehicle are shown up front. VAT-registered companies will also benefit from tax-breaks when leasing -- up to 50% of the VAT on the payments can be reclaimed, along with all of the VAT on the maintenance agreement.
We offer personalised leasing quotes to business owners, so you can be sure you're getting the best deal if you decide that leasing is the right option for your business.
What are the benefits and drawbacks of leasing?
Of course, leasing is not without its drawbacks. Here's a quick rundown of the advantages and disadvantages of leasing a car.
Benefits |
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Drawbacks |
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How much will it cost?
This depends on a number of factors, the most important being the value of the car. Your annual mileage and the length of your contract also affect the cost of your lease. To get a competitive leasing quote, simply use our Personalised Lease Quote service and we'll search the marketplace for the best deal.
Remember, there is no substitute for doing your homework. Carefully consider the relative merits and associated costs of buying and leasing before making your choice. If you decide that leasing is right for you, you might want to look at our leasing page, which offers competitive rates from a long list of nationwide leasing companies. If you decide to buy, you can get a quote, order a brochure or request a test drive in our new cars section.
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