How to work out when to lease or buy

  • By John Wilmot
  • 2 min read

Should you really always lease your car?

A graphic of a lease contract and a set of car keys.

Should you really always lease your car?

99% of the time I’d say yes. Sure, there are specific cars that if you have your heart set on them, they are very expensive to lease and buying is the right choice. Almost every Porsche on the market, for example. Leasing would be expensive and depreciation is relatively light.

So what about this 99%?

Well the reality is that if you are prepared to be flexible, leasing will always be cheaper than owning so it makes no sense to buy.

A friend of mine asked ‘any good lease deals going on a commuter car. Something small, diesel and economical?’

With my market knowledge, I immediately knew that a Golf GTD would be perfect for him and current deals were decent. Looks good, relatively quick and economical.

The cost?

£260 a month on 9+35 = £11,440 total for 45k miles over 3 years.

Just to prove the point, I looked up Autotrader for a 3 year old Golf GTD with 45k miles on it and put the reg into — the offer? £13,600, £13,400 depreciation on the £27k list price.

Nearly a £2k saving (£55 a month) when leased.

Ok, so you can save £1k by buying a demo car but the saving is still there on leasing.

AND, this doesn’t include any finance costs on your purchase. On a 4 year PCP, selling on year 3, you would have paid £4–5k in interest on the loan.

AND, your road tax is included in the lease price.

All-in-all, taking a 3 year lease on a Golf GTD would save you £5–6.5k Vs. buying. That’s not even a super-hot lease deal, it’s just a conversation with a mate of a typical car buying thought process.

I’ve kept this simple as there are other things to consider like service plans, MOTs, maintenance, tyres etc but just to give yourself an idea of the costs of buying, focus on:

  1. The depreciation of your target car based the current price less the future resale price of that model.
  2. Finance costs on any loan you would take over the period — how to calculate this can be found here:
  3. The cost of road tax over the ownership.

So for your next car, do the maths and I’m sure you’ll find yourself in that 99%.

Quickly search all the big leasing sites