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Car Leasing Vs Car Loan

should i get a personal contract purchase or hire purchase agreement when buying a car?
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Considering getting a new car? Weighing up car leasing Vs car loan? When you’re looking to purchase a new car there are a range of options open to you. You can pay the full amount in cash, lease the vehicle or take out a car loan. If you want to finance your purchase through a loan or lease agreement, what are the advantages and disadvantages of both?

Car Leasing

Lease agreements are a popular method of purchasing new cars without having to pay for it all upfront. It can be a cost effective and convenient method of buying your vehicle and means you might be able to afford a slightly better model. To take out a lease agreement you’ll need to pay a deposit (usually equivalent to 2-3 months payments) and then pay fixed monthly repayments for a set term. Before you agree to a lease contract, you should research any fees or charges for missing a payment or ending the agreement early.

Some car leases will also include maintenance costs, which could be a useful way of budgeting, as you won’t need to worry about any unexpected repair bills. You should look at exactly what the manufacturer’s warranty covers and if the extra maintenance costs provide a better deal.car leasing Vs car loan

One of the potential disadvantages of leasing a car is that at the end of the repayment period you don’t own the vehicle. You have the option to buy the car, return it or take out a new agreement on another model. However, as you don’t own the vehicle, you won’t need to worry as much about it depreciating in value over time or selling the car when you want a new one.

When you’re looking to lease a car, you’ll need to consider exactly how much mileage you cover every year. Don’t under estimate this figure, as it’ll be used to calculate your monthly repayments. If you go over this you’ll have to pay a fee per additional mile. The cost of leasing a car varies depending on the make and model of the vehicle. Generally, cars that take longer to lose their value will have lower monthly repayments than those that fall rapidly.

LenderLoan Amount
over 48 months
Representative APR%Cost 
£7,5007.8% APR Representative£181.46 per monthApply
£7,5005.8% APR Representative£174.94 per monthApply
£7,5005.8% APR Representative£174.94 per monthApply

Car Loans

If you want to pay for the car in installments, but still own the vehicle, then a car finance deal would be a better option. These can be used to purchase either a new or used vehicle and can be arranged independently though a bank or finance company or direct from the dealer.

A car loan is an unsecured personal loan. You’ll need to pay an initial deposit and will then make fixed monthly repayments over a set amount of time. The amount that you can borrow will depend on your credit rating and this will also affect the APR (Annual Percentage Rate) that you’re offered. An advantage of a loan agreement over car leasing is that there’s generally the option to repay the loan early if possible. Some companies will charge an early repayment fee for doing so.car leasing Vs car loan

At the end of the repayment term, the car is yours to keep. When you want to purchase a new car, you’ll be responsible for selling it. The car will have depreciated in value over the repayment period, so will be worth less than you originally paid.

Talking out either a lease agreement or a car loan means that you’ve got a greater choice of cars to choose from and you don’t have to pay for it outright. However, you need to look at the options carefully and decide which is best for your situation.

 

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