Is it better to buy or lease a car?
Is it better to buy or lease a car?
Deciding whether to buy or lease a car is a significant financial decision. Depending on your lifestyle, budget and driving habits, both options have pros and cons. In this article, we’ll explore whether it is better to lease or buy a car, helping you decide which option is best.
Leasing vs buying explained
When you buy a car outright, you take full ownership and can keep it for as long as you like. On the other hand, leasing allows you to drive a new car for a fixed time before handing it back, allowing you to avoid depreciation costs. If you’re new to leasing, you can learn more by reading our guide.
| Buying | Leasing | |
| Initial Cost | Larger upfront payment. | Lower upfront costs (Typically 1-12 months initial rental). |
| Monthly Payments | Higher (If financing, as payments are based on the entire value of the car). | Lower (Only covering depreciation over lease term). |
| Ownership | You own the car outright or pay off a loan to eventually own it. | You return the car at the end of the lease. |
| Maintenance and Repairs | You are responsible (After warranty expires, if applicable). | You have the option to lease with a maintenance package. |
| Mileage Limit | Unlimited. | Limits apply, will be charged extra if these are exceeded. |
| Flexibility | Keep or sell at any point. | Must return the car or pay fees to end the contract early. |
| Depreciation Risk | You bear the cost of depreciation. | Leasing broker or lender takes the hit of depreciation. |
Pros and cons of leasing vs. buying
Understanding the pros and cons of leasing vs buying will help you decide which option suits you best.
Pros of leasing
Leasing a car means you’ll benefit from lower monthly payments. These costs are fixed, so you’ll know exactly how much you’ll be paying each month. It also allows you to drive a new car every few years, once your existing contract runs out, without having the hassle of selling or trading in the car. Including a maintenance package is also an option with leasing, which covers routine servicing, mechanical and electrical repairs, breakdown recovery and more. Choosing a maintenance package will reduce the chance of unexpected costs during your lease.
Cons of leasing
It’s important to be aware of a few factors when leasing. When arranging your leasing contract, you’ll agree to an annual mileage limit. If this is exceeded, there will be additional charges. Since you’re not buying the car, you won’t build equity – however this does mean you avoid the risks of depreciation. Ending your leasing contract early will involve fees, so it’s helpful to choose a term that works for you.
Pros of buying
Buying a car means that it’s now your asset that you can sell or trade in at any time. You also have the freedom to modify and customise the vehicle as you wish, if that’s something you’re interested in.
Cons of buying
The downside of buying is the higher initial cost. If you’re on a hire purchase agreement, monthly payments will also be higher as you’re paying off the full cost of the vehicle. When buying, you’re also responsible for maintenance and repair costs, once any warranties expire. When it’s time to sell, you’ll also face the risk of depreciation.
Is it better to lease or buy a car when self-employed?
Leasing offers a range of benefits to businesses, as well as self-employed individuals. Lease payments can often be claimed as a business expense, reducing your taxable income. Additionally, VAT-registered businesses can claim part of the payments back.
How to choose between buying and leasing
Ultimately, the decision between buying and leasing comes down to a range of factors. Whether you’re a personal or business customer, you’ll want to consider the following:
Consider your personal finances
If you prefer predictable monthly payments and lower upfront costs, leasing makes more financial sense. When leasing, you avoid large down payments and benefit from fixed monthly costs, which makes budgeting easier. If you have the budget for a higher initial payment and want to avoid monthly payments, buying may be the better option.
Think about your driving habits
If your lifestyle or business operations don’t require long-distance trips, then leasing may be the better option. You’ll be able to get better deals with lower mileage limits and avoid excess fees. If you drive a lot, then buying may work out better.
Assess insurance, maintenance and tax implications
Leased cars often come with manufacturer warranties that cover most repairs, which will reduce the cost of maintenance. If you’re self-employed or using the car for business purposes, leasing also offers tax advantages. Monthly lease payments can often be offset as a business expense, reducing your total tax bill.
Evaluate your flexibility needs
If you enjoy driving the latest models, then leasing also allows you to switch more frequently without the commitment of ownership. Contracts are typically two to four years long. This flexibility means that you’re not stuck with a car or van that you’ve outgrown or no longer suits your needs if situations change.
Find out more about car leasing with Synergy
If leasing sounds like the right option for you, Synergy offers a great range of personal and business lease deals. Explore our personal leasing and business leasing pages to find the perfect lease deal for you. If you’re not quite sure where to start, our award-winning customer service team are happy to help. Get in touch today to discuss your options.
