If you’re in the enviable position of purchasing a new car, finding the cash to pay for it outright might prove to be a sticking point. But with more ways than ever to finance your new ride, is it better to buy or lease a car in the UK to get the best deal for you?
Pay up front or lease?
Buying a new car is one of the biggest purchases you can make, alongside buying your home. And for the same reason very few people buy their home outright, few of us are able to lay our hands on £20k just like that to buy a new car. Fortunately, that’s what finance was invented for – whether it’s a mortgage or a car.
When you look into credit options to purchase your car, you’re usually faced with three options: hire-purchase, a long-term lease, or a Personal Credit Purchase (PCP). So which one is best for you? Let’s look at how all three work and give some pros and cons for each to help you decide whether to buy or lease a car in the UK.
Much like any other purchase on HP, once you’ve paid your initial deposit, you’re contractually obliged to make your monthly repayments over an agreed term. Once the payments have all been made and the agreement expires, the car is then legally yours.
Again, an initial deposit is required for a long-term lease and you make monthly payments over an agreed period of time. However, at the end of the lease, the car is no longer yours and goes back to the dealer.
Personal Credit Purchase (PCP)
Like the HP or long-term lease agreements, you also need a deposit for a PCP, and the usual pre-agreed monthly payments also apply. However, at the end of the term, you can choose what you want to do: give the car back to the dealer, or make a final payment (also known as a ‘balloon payment’) and keep the car.
What are the pros and cons?
Buying your car outright would make life easier if you can afford it, but you run the risk of massive depreciation at a fast rate. Not only that, you’ll also be responsible for all service and repair costs over the years. But, if you’re not too worried about this and you can find the money up front, then it may be preferable to tying yourself to an agreement over several years.
However, if you’re leaning towards the flexibility of leasing, then it could be a good option. For starters, you’ll have a brand new car without the worry of depreciation. You get to hand the car back at the end of the agreement with no worries about selling. And the car will be covered by the manufacturer’s warranty, with any costly services and repairs taken care of. Leasing could also work out cheaper per month than HP or PCP options too, which could be useful if you’re looking for car covers for sale to protect your new wheels!
But for all the leasing plus points, ultimately it comes down to the fact that at the end of your agreement (unless you take a PCP option and make a balloon payment at the end), you’ll end up without any car at all. So after all your monthly payments, you’ll have nothing to show for it. Whether you choose to buy or lease a car in the UK comes down to your personal circumstances and preferences. But, as with any large purchase, it’s worth taking your time to understand each option and pick the one that suits and works best for you.