Leasing vs. Buying a New Car

It’s the ultimate conundrum, should you buy a car that will only depreciate in value or lease one and pay an ongoing monthly payment for the privilege? Both options have their pros and their cons and it is a case of working out which is the best option for you. Luckily, we’ve come up with a guide of the benefits and pitfalls of each option to help you out.

Monthly Payment

So, with either option, you are going to have to make a monthly payment, unless you have enough in the bank to pay cash for a new car. When you buy a new car, however, this monthly payment will have an end date. Once you have paid off the finance the payments will cease and the car will be yours to do with as you wish. With leasing, you will be paying a monthly payment for as long as you wish to lease a vehicle and it will never be yours. The monthly payments can, however, work out a lot cheaper if you lease, meaning you can often afford a better car.

Down Payment

you are going to have to make a monthly payment, unless you have enough in the bank to pay cash for a new car

Again, either option is going to see you have to make a down payment to secure your finance if you are buying a car and your lease agreement if you are leasing. The down payment is almost always lower if you choose car leasing over purchasing a new vehicle but it is worth bearing in mind that you will have to make a similar payment everytime you sign up for a new lease agreement.

Interest Rates

It seems that leasing a car could also give you make it cheaper when it comes to interest rates. Typically, when you lease a car you are only paying interest on the depreciation of the vehicle during the term that you are driving it. So, the cash value will be much less than for someone buying a new car outright who would be paying interest based on the sale price of the car minus the down payment.

Total Value after Years

After you have bought and paid off a new car the value that the car still holds will be yours. Read our blog post, if you want to see which used cars are popular to determine which might hold their value better. That being said, the value will be significantly less than what you paid for the car, thanks to depreciation. If you lease a car, you never have to worry about this, you can drive around a new car without ever having to worry about what is happening to its value.

Resale Value

This is really the biggest downside to leasing a car. There is no resale value, at the end of your lease agreement you have to pass it back to the finance company and there is no option to buy it. Buying a car is more expensive upfront but you do get to keep some equity at the end of your financial agreement. You need to weigh up what matters most, having a new car every few years where you don’t have to worry so much about maintenance costs or wear and tear or having some equity in a vehicle.

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