Pros and cons of leasing a car

There are so many ways of buying a car that it’s not always easy to work out which one is best for you. Car leasing, or Personal Contract Hire (PCH), is a popular way to get into a brand-new car without actually buying it but it’s considered alongside other methods including PCP finance, HP finance and bank loans. As you’d expect, there are advantages and disadvantages to each option.

If you’ve seen a tempting lease deal on a new car but aren’t sure what leasing involves, we have a comprehensive guide to car leasing that will help. You should also check out our leasing deals page to see the latest offers from top providers on the Auto Express Buy A Car service. If you know what leasing involves but aren’t sure if it’s right for you, read on for the pros and cons of car leasing in the UK.

Pros of leasing a car

Leasing is an increasingly popular way to finance a new car and below are the key reasons for that popularity. 

Low monthly payments 

Leasing is a good way to get more affordable monthly payments and a lower upfront cost. One of the biggest advantages to a leasing deal is its affordability. It might mean you can afford to get a new car when previously you’d only had used cars, or perhaps you could drive a nicer lease car than you would otherwise be able to if you bought a vehicle on finance.

Predictable costs for easy budgeting

With leasing you only really need to worry about paying the monthly payments and upfront cost. These are agreed at the start of the leasing deal and stay fixed, so budgeting is easy. 

Leasing payments include ‘road tax’ (VED) and you don’t have to consider depreciation be cause you will never be the owner of the car. There’s also no large payment at the end of the leasing agreement; you just hand the car back and stop paying.

Option to include maintenance

If you choose too, you can also get maintenance included in the monthly payment at extra cost. This would cover such things as servicing, replacement tyres, wear and tear items like brake pads and wipers, and some deals even include MoTs. 

This further simplifies your ownership so you don’t need to worry about any unforeseen bills, but as mentioned above, it would increase your monthly payments. If you do decide to enter into a full maintenance leasing agreement, then the only other costs to consider will be fuel and car insurance.

Flexibility

Leasing a car can be pretty flexible too, because before you enter into an agreement you can adjust the terms such as annual mileage or the length of the contract to suit your lifestyle. 

You just need to work out how many miles you average each year, then set your mileage limit above that. We’d recommend getting more miles than you need as you will be charged for going over the pre-agreed limit.

Cons of leasing a car

Leasing will not be for everyone and here are the main disadvantages…

You never own the car

The main disadvantage of leasing is that it’s essentially a rental, meaning you are only paying to drive the car and will never have the option to own it. 

This means all the money you pay into the agreement isn’t going to build equity in an asset. At the end of the lease deal you just hand the car back. 

With other finance agreements you either buy the car automatically or have the option to buy. A PCP deal pays off part of the car with monthly payments and then you get the option to pay a final balloon payment to own the car. With HP the monthly payments cover the car in full and you own it at the end.

It’s not always cheaper in the long run

While leasing might look cheaper initially, you need to work out all the costs carefully before you commit. It might be a lot cheaper per month to lease a car, but if you spent a bit more to actually own the car, then you could sell it later to recoup some of that, and the total cost might be less. That’s not always the case, though, so it requires careful consideration if you want to save money in the long run.

You are committed to the terms of the contract

As with all finance agreements, leasing requires that you always make the payments. If you can’t pay, then the car can be taken away and your credit rating will take a hit. 

You also need to keep under the mileage limit to avoid fees, and keep the car in good condition. If there’s damage, hasn’t been maintained in line with manufacturer guidance, or is in poor condition when you give the car back, you’ll be fined as well.

It’s also very difficult to end the deal early in the event of financial difficulties or something changes in your life. If you do need to end it, you will most likely need to pay a financial penalty. 

You cannot modify or sell a lease car

You cannot modify or sell your car if it is leased. Given that leasing is effectively a long-term car rental, you don’t ever have control over the car, beyond when to have maintenance carried out. Any money you spend on consumables like tyres or brakes is also lost once you hand the car back.

Is leasing a car right for me?

Although the eye-catching monthly costs make it look like leasing is good for saving money, that’s not always the case. It’s a finance method mainly for people who want to keep things simple and pay for peace of mind rather than get good value for money.

This is because while you might pay less per month than for an equivalent PCP finance deal or bank loan, you own nothing at the end of the leasing agreement. All the money you spend is gone and you have to hand back the car at the end; you can’t sell up or use it to help pay for your next car.

However, you might be able to drive a nicer car than you could otherwise afford with a leasing deal, and if you don’t mind losing a bit of money in the long run, it could be well worth it. It’s really up to you to work out the overall cost and whether it’s worth it to you to get the car you want. Sometimes the best decision isn’t always the cheapest, but only you can decide that. As long as you have all the information, you should be able to come to a conclusion.

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