Should I Finance or Lease My New Car?

16th Mar 2022

There are a number of finance options out there for car buyers to help make purchasing their next vehicle more affordable. You have everything from hire purchase, to personal contract purchase car financing and even lease purchase. But what is the primary difference between financing a car and leasing it? Because not many motorists out there know.

What is means to lease a car

Essentially when you lease a car you’re renting it from the dealership for a certain period of time. You still make monthly payments as you would when financing a car, but there is never the option to own the car outright at the end of the agreement. Instead, you have to hand the car back, and then you can upgrade to another car and repeat the cycle.

What it means to finance a car

When financing a car, you borrow money from a car finance lender which you repay in monthly instalments, plus interest. Because of this, the finance lender legally remains the owner throughout the contract until you make the final repayment.

The two most common ways to finance a car are on hire purchase or personal contract purchase. Hire purchase is great if you want to own the car outright at the end of the agreement, but personal contract purchase gives you more flexibility. With a PCP deal you have the option to either make a lump sum (known as balloon payment) at the end to own the car outright, exchange it for another car and refinance or return the car altogether.

Related: How does car finance work?

Advantages of leasing a car

Generally, your monthly payments when leasing a car will be lower than if you were to finance. This is because you’re technically only paying for the value for the time you’re driving it rather than the entire vehicle.
You get flexible contract options; you can choose how long you want to rent the car for and the mileage limit.
Typically they are covered by a warranty and any maintenance and repair work is included

Disadvantages of leasing a car

You’ll have a set mileage limit and you have to pay extra if you exceed this
When you come to hand the car back, if wear and tear is excessive, extra charges also apply for this
Typically only available for newer cars

Advantages of financing a car

Available for both new and used cars
PCP also promises low monthly repayments as the repayments only cover part of the cars value
PCP gives more flexible buying options at the end of the agreement
Buying on HP means you can own the car outright at the end of the contract
There are no mileage restrictions

Disadvantages of financing a car

You assume responsibility for any major repairs
Generally higher monthly repayments
Finance contracts are usually longer than lease contracts
You’ll be hit harder by the cost of depreciation

Is it better to buy or lease a car?

So, the question remains, is it better to buy or lease a car? Honestly? It depends on your preferences, but we do have some general advice on this.

Leasing a car may be better if you’d like a newer car and want lower monthly costs but aren’t set on owning the car outright. On the other hand, financing a car may be better if you’re considering used as well as new vehicles, you’re happy to keep one car for a fair few years and don’t want to be restricted by mileage and maintenance limits.

Cars available for lease and finance in Leeds

Here at Car Synergy we work with a panel of lenders to provide personal contract purchase, hire purchase and lease agreements for all our used cars. To find out how easy it is to apply for car finance with us, visit our finance page, or contact our team if you’ve found a car you’re interested in financing.