# Leasing a Car vs Buying

In recent years, it's safe to say that car leasing has skyrocketed as a way to get yourself in the driver's seat of a brand-new set of wheels. The question is: does that mean that leasing a car is now a better option than buying outright?

Usually, yes, but it sometimes depends. And to be honest, it's difficult to give an objective, one-size-fits-all answer here for everyone as so many people's needs differ and so many of the perks and pitfalls of both leasing and buying overlap with each other. Sort of like a game of Rock, Papers, Scissors.

Still, it's hard to argue against the fact that leasing is a good way to go in the modern age. The fact of the matter is that it offers tremendous flexibility, so if you're curious to know how it compares with buying outright for your particular situation, then we invite you to read on.

## How Does Car Leasing Work?

Despite its rise in popularity, leasing still isn't as well-known as, say, PCP, so here's a quick but effective explanation. Or for those of you who do know, a quick recap.

Basically, when you take out a lease agreement on a new car or a van, you're essentially renting it out for a set period of time. That period of time usually lasts between two to four years, but it could even be as little as one year.

Like with a Hire Purchase (HP) or a Personal Contract Purchase (PCP) agreement, the vehicle still belongs to the provider, not you. But what makes leasing unique is that you don't have the option to own the car at the end of the agreement. It's also usually cheaper per month than in a PCP or HP deal.

So, that's leasing in a nutshell, but if you'd like a more in-depth, detailed look at the whole process and the specifics of each individual step, you can always take a look at [guide to car leasing](https://www.leaseloco.com/guides/personal-car-leasing/guide-to-car-leasing).

## How Does Car Buying Work?

Not much to explain here, but we'll say it anyway. You all know how buying a car works: you contact the seller (whether that be a dealership or a private seller), you pay for the car upfront, and voila . . . it's all yours. Pretty self-explanatory, and not much more to be said.

Now for the nitty gritty.

## Leasing vs Buying: Affordability
This is probably the most important factor in making any decision. You might already know that leasing is known for lower monthly payments when compared with HP and PCP, but how does it compare with buying?

Well, because of those low monthly costs, you're going to be able to drive a more expensive car (and with better features) than you would if you were paying outright in one big payment. That's because with buying, your choice is limited by the amount of cash you've managed to save up.

Let's say you see a nice [BMW4 Series](https://www.leaseloco.com/car-leasing/bmw/4-series) and it's priced at £16,000. You can't afford that amount up front, but you might be able to afford it when it's stretched across fixed monthly payments for an extended period of time.

True, buying often makes sense if you're prepared to stick with a car for a long period of time. It's just accessing that initial lump sum which is the problem. Luckily, leasing is the perfect solution, and for that reason, it has to win on the affordability side of things.

## Leasing vs Buying: Car Ownership

At times, ownership almost seems to have a sacred value attached to it. For some, being able to look at something and say, 'I own this', can really be worth a million dollars.

Thing is, that feeling might be justified with a house or property that's bound to increase in value, but unless it's a vintage or classic model, a car is pretty much a depreciating asset (in other words, it goes down in value overtime).

So just take a moment to think about how important the pride of ownership means to you before taking out a lease. Nine times out of ten, other people are going to judge you for the car you drive, and not whether you legally own what you drive. Just something to think about!

## Leasing vs Buying: Selling the Car

Yes, it's true that if you buy and own a car, you do then have the flexibility to sell it on at any point. However, selling it can also be a time-consuming hassle, and due to vehicle depreciation, you're bound to receive less than what you paid for it in the first place. But depending on the car's depreciation and how savvy you are with the sale, you could get up getting a decent chunk of that money back. Then again, you might not.

With leasing a car on the other hand, you don't have to worry about the hassle of selling the car on. You simply use it till the end of the agreement and hand it right back. Simples. Plus, it allows for a change of car more often.

## Leasing vs Buying: Car Mileage
This can be a deal-breaker for some people. A lease deal has mileage restrictions (tailored by you at the start of the agreement), and not having the reassurance in your mind that you can go however far you want in however much time can potentially be a daunting prospect.

But if you carefully assess just how far you need to travel each year (plus a little extra for holidays and spontaneous road trips), you should be able to not overstep the limit.

Besides, you can change your mileage limit **at any point** during a leasing contract with the leasing company. Talk about flexibility!

## Leasing vs Buying: Car Modifications

It goes without saying that if you've bought a car outright, then you can modify it to your heart's content. Stickers, decals, the lot.

But contrary to expectation, you can actually modify a lease car as well. You just need to get permission first from the funder that owns the vehicle. If you don't, you could risk invalidating the warranty on the car whilst also facing a potential fine at the end when you hand the car back. Depending on the extent of the proposed modification, the provider may or may not accept.

## Leasing vs Buying: Fair Wear and Tear

A potential downside with leasing when compared to buying is that you might have to pay for excess [fair wear and tear charges](https://www.leaseloco.com/blog/leasing-fear-of-fair-wear-and-tear-6f9df364db0b) when you hand the car back at the end of the agreement. Obviously, cars wear down over time, so some amount of wear and tear on a lease car is acceptable, but things like chips and dents etc might not.

But as long as you take reasonably good care of the vehicle, this is probably not something to worry about too much. And owning a car isn't really a 'get out of jail for free' card here either, because although nobody is going to force you to pay for excess fair wear and tear, if you want to sell the car on at a reasonable price, any dent or chips will have to be removed.

## When Might Buying Actually Be Better?

Unless you're sure that you want to hold onto it for a good number of years, buying doesn't really make financial sense with a new car as it depreciates as soon as you drive them off the forecourt of the dealership. Therefore, we'd say that leasing is definitely the way to go for new cars.

However, buying outright does make sense for a used car that's three or four years old as it has already gone through its major depreciation phase and its future depreciation is going to be much slower, meaning you'll lose less money when (if) you eventually sell it on.

#### Advantages of Leasing

* No depreciation worries

* Fewer repair costs

* Able to afford higher-spec cars

* Freedom to switch car more often

* Lower upfront cost

* Manageable monthly payments

* Cheaper than PCP

* Requires a good credit score

#### Disadvantages of Leasing

* No asset/lack of ownership

* Restricted customisation/modifications

* Technically a form of debt

* Potential mileage/wear and tear charges

* Don't have hassle of selling on

* Mileage limits

* Early termination fees

#### Advantages of Buying

* Asset/sense of ownership

* Unlimited customisation/modifications

* Makes sense long-term

* Not a form of debt

* No mileage limitations

* Doesn't require a good credit score

* Can sell at any time

#### Disadvantages of Buying

* Possibility of depreciating in value

* Repair costs

* Less able to afford higher-spec cars

* Large upfront payment

* Hassle of selling on

## Summary

So, we've covered it all, amigos. Buying might have certain benefits like freedom over mileage and modifications, but the flexibility and affordability of leasing does arguably outweigh this, allowing you to switch between high-spec lease cars on a regular basis.

Of course, in the end, the choice is yours.

Your definitive guide to the age-old question. Well, ever since leasing became a thing ... !

Leasing a Car vs Buying | LeaseLoco

Leasing a Car vs Buying

Here's the thing, amigos.

Accidents happen, and especially car-related accidents. It's a fact of life.

Your odds of being involved in a traffic accident are roughly 88/1, and your odds of being involved in a serious traffic accident are roughly 606/1. Those figures might not seem overly high, but they're not so low as not to be worth worrying about. Out on the roads, anything can happen.

As we all know, being involved in a car accident is always stressful, no matter whether you own, hire or lease your car. But knowing what to do with your damaged leased car after it has been involved in an accident is far from obvious. There's the matter of insurance, then how the crash affects your lease, and then the steps to take with your lease provider. It can be a lot to think about . . .

But as luck has it, your friendly neighbourhood vehicle leasing experts here at LeaseLoco are on the scene to fill you in with all the details. Yep, right here in this guide.

So buckle your seatbelts and let's get going.

## What to Do at the Scene of the Accident

Same as you would do with any other accident, whether you're on a car lease deal or not.

You stop at the scene, turn your engine off and switch on the hazard warning lights, then exchange details with the other motorist(s). Call the emergency services if anyone has been injured or if there are vehicles blocking the road.

For insurance purposes, it's important to exchange insurance details and gather as much information as possible, so:

* Note the address and location of the incident and at what time it took place
* Note the details of every vehicle involved, including model, colour, and vehicle registration number
* Note the contact details of the other drivers involved and any pedestrians who were witnesses to the incident
* Photograph any injuries and any damage to vehicles and property

Then . . .

* As already discussed, call your insurance company as soon as possible
* Give them your details (including registration number, name and address), and recite the information above that you've just collected

Important fact: under the Road Traffic Act 1988 section 170, it's actually an offence to fail to stop at the scene of an accident or to fail to report an accident in which you're involved. (And even if you aren't directly involved but your presence was a factor in the incident, it's advisable to stop and remain at the scene for a reasonable length of time.)

If for some reason you aren't able to exchange details with the other driver at the scene, you'll have to report the accident at a police station or to a police constable within 24 hours. And it is compulsory to provide your insurance certificate if another person is injured. Failure to comply with these obligations is an offence under the title 'Failing to stop' and 'Failing to report'. The penalty for it includes a maximum £5,000 fine and 5 to 10 points on your license, not to mention the possibility of a driving disqualification and six months' imprisonment.

Ouch!

## Telling Your Insurer

Even if you are not making a claim yourself, it's vitally important that you report the accident to your insurance company as soon as possible. Failure to do so could invalidate your cover, and chances are that your insurance policy will have a clause in it saying that you need to take this step.

However, in the event that you're paying for repairs yourself in order to preserve your no claims discount, you don't have to submit a claim. The cost of losing your no claims bonus may end up being more than the cost of paying for the repairs yourself.

You will still need to tell your insurance company that you've been involved in an accident. You should supply this information in a letter, telling your insurer what happened, that it is for 'information only' and that you don't want to make a claim.

## What Will Happen to my Insurance if my Lease Car is in an Accident?

Unless you cancel the insurance policy, you'll have to keep making the monthly payments if you've been paying monthly up until this point. The majority of insurance companies let you continue on their policy for 2-3 weeks until you set yourself up with a replacement car. Once you've gotten that replacement, you can set up a new policy. However, if you don't plan on getting a replacement car, you're free to go ahead and cancel your policy.

If your car is a total loss, then you've still got options. If the car is less than 12 months old at the time of the accident, some insurance companies will offer what's called 'New Car Replacement' whereby they will provide you with an identical car. But because you're leasing and you don't own the car, whether you get this or not is entirely up to the finance house. After all, they are the ones who own the car. It's an option that makes great financial sense, but you might be in for a long wait, as you could end up waiting 2-3 months for a replacement car!

## What Happens if the Lease Car Can be Repaired?

Contact your leasing company to check if they can offer you any repairs and at what value. They might only permit you to stick to a list of qualified garages specified by them, but if not, then be sure to shop around as prices can differ across the full range of garages.

The garage mechanics will be able to offer you a final quote for the cost to repair the lease vehicle.

In order to make a claim on your car insurance with your insurance company, you need to have gathered all your documents along with information of the traffic accident. That's why it's so important to stop at the scene and write down or record all of those details we mentioned earlier.

## What Happens if you Total a Leased Car?

When the vehicle is a total loss, it should be possible that your insurance company pays up and reimburses you for its current worth. You’ll end the lease when the current value of the vehicle equals the remaining balance of the lease, and you break even. 

However, you will most likely still owe the leasing company money up to the full value of the vehicle.

That's where gap insurance comes in. Check your policy to see whether it's included. Usually GAP insurance is pretty cheap and is almost always worth having. This is the same if you write off a car that's financed with PCP too.

## What Happens if the Lease Car is Written Off?

The finance house will treat it as if you've bought the car, and therefore end the agreement.

So you will need to get a new contract and go through the whole process again.

But as you still have finance to pay, they will decide on a settlement figure for you to pay. The car insurance company will then pay out how much the car is worth at the time of the accident. Hopefully that's enough to cover the settlement figure. If not, you'll have to pay that yourself, unless you've got Gap insurance. Gap insurance will cover that cost, whereas if you didn't have Gap insurance, you'd have to find the money yourself. This is the same if you write off a car that's financed with PCP too.

## Who is Responsible for Repairs on Leased Cars after an Accident

If another driver caused the accident then you have a right to compensation for any losses as that driver's insurance company should be liable. That includes compensation for any physical injuries suffered by yourself and/or damage to your leased car. If your vehicle is totalled, then they will pay up to the vehicle's market value at the time of the accident.

As is the case with any other automobile accident where the other motorist is the one at fault, the payment will be sent directly to the leasing company and any additional losses reimbursed to you.

But what if the other driver's insurance company denies liability on behalf of them? Well, in that instance you may need to contact your own insurer to negotiate repairs covered by your policy.

## What Kind of Damage is Acceptable on a Lease Car?

Obviously, major damage is a big no-no, but that begs the question: what amount of damage IS acceptable on a lease car? After all, throughout the course of your agreement, your car is bound to pick up some wear and tear from the effects of weather and simply being driven, and any leasing company worth the name knows this. This is why they don't charge you for what's known as [fair wear and tear](https://www.leaseloco.com/blog/leasing-fear-of-fair-wear-and-tear-6f9df364db0b), which includes:

* Regular tyre wear
* Typical brake wear
* Removable stains in the interior
* Minor scratches and dinks on your lease car

Exactly what's deemed acceptable may differ from leasing company to leasing company, so be sure to check over your contract. In general though, you should be fine with the above.

## Turning in a Leased Car with Damage

It's a mistaken belief that your leasing company simply forgives any damage as long as you take out a new leased car with them. No matter what your dealership tells you, someone is going to be responsible for paying up for the damages, and you can bet your two front wheels that it's not going to be them! Even if you go on to take out another car with that dealership, the damage won't be forgiven.

And even if you don't end up paying in cash, the leasing company will transfer the cost of the damages from your previous vehicle onto your new one. That being the case, you will essentially be paying them for the duration of the new lease, as well as paying interest on top of that.

## Summing Up

Well, that about covers it, amigos.

Being involved in a car accident is terrible. We all know that. And as you've no doubt learned, dealing with a damaged lease car can certainly make things more than complicated.

But hopefully you've also seen that it's far from the end of the world. So long as you take the right steps and follow the proper procedures following a car accident, you can be sorted and back on the road in no time, and ideally without having to pay up anything extortionate.

Best way of avoiding the above, though . . . don't become involved in any car accidents. (And just hope that nobody else crashes into you!)

## Leasing With LeaseLoco 

LeaseLoco makes it super quick and easy to search through the hottest car and van leasing deals on the market. We want to give you every confidence that you are working with the very best brokers and car dealers, which is why all of our leasing partners have signed our [Ethical Code of Conduct](https://www.leaseloco.com/ethical-code-of-conduct) and why we have the highest advertiser [partner criteria](https://www.leaseloco.com/partner-criteria) in the industry.

Plus, all of our available deals on a lease agreement include . . .

* FREE delivery to your door (mainland UK)
* Manufacturer's warranty
* Breakdown cover
* Road tax

If you’ve read the benefits of car leasing here in this guide and think that leasing a car is the best option for you then why not check out the [hottest lease deals available](https://www.leaseloco.com/car-leasing/search) to find one that suits you best?

As we all know, being involved in a car accident is always stressful, no matter whether you own, hire or lease your car. But knowing what to do with your damaged leased car after it has been involved in an accident is far from obvious.

What Happens If You Crash a Leased Car?

# Benefits Of Leasing A Car
Leasing has become an increasingly popular way to bag yourself a brand new car through fixed low monthly payments. There are many benefits to leasing, as well as disadvantages that come with any form of paying for a car. We’ve highlighted these in this guide to help you decide if leasing is for you.

## Top 8 Benefits Of Car Leasing
* Brand new car every few years
*	Low fixed monthly costs 
*	Road tax, manufacturer’s warranty & breakdown cover included
* Never have to sell your car again
*	No depreciation worries
*	Simple process 
*	No deposit options
*	Flexibility 

## Advantages And Disadvantages Of Car Leasing
So, what are the good and bad things about car leasing? We have listed the top advantages and disadvantages to consider if you’re contemplating whether to lease your next car or not.

### Advantages Of Car Leasing

#### Drive a brand new car
One of the benefits of leasing a car is that it gives many the opportunity to drive a brand new set of wheels for a lot less than they would expect! Rather than buying and owning a car, you can lease one and change your car every few years. This means that you keep up to date with the latest model releases and experience the newest technology. 

####  Simplicity 
Leasing a car these days could not be easier. You don’t own the car so you never have to worry about the hassle of selling it. You simply hand it back and can organise another lease car to be delivered straight to your door for free through LeaseLoco’s leasing partners. There are also more and more manufacturers providing free breakdown cover for the warranty period of the car, meaning even more peace of mind for you.

#### Cost
Throughout a contract, a car lease is typically cheaper than a PCP deal. This is because PCP deals typically have a bit more flexibility and the option to own the car following a balloon payment. Although, many people will take out a PCP deal, and still hand it back as opposed to paying the balloon payment. To avoid overspending, it is a good idea to consider the cost savings through the cheaper monthly payments with leasing.

We would say that cost is the #1 reason to choose leasing over buying, and we show a great example of this on our [Why Lease](/why-lease) page.

### Disadvantages Of Car Leasing

#### Never own the car 
If you think about leasing a car, like renting a house, you will never own it. With other car finance options such as PCP or HP, you have the option to own the car at the end of the term. You won’t get this option with leasing, which is why the payments are so low! 

#### Mileage limits
When you take out a lease deal, you will need to choose a mileage amount that you predict you will do over the term. For many people, this isn’t too hard if they can easily predict their mileage. However, this may be a drawback for others who do not want to be limited by a mileage amount throughout their lease and are worried about facing an excess mileage charge if they go over. 

#### Cannot modify car
As you are leasing the car, you cannot make any permanent changes to it. You can make changes such as adding a private number plate or tow bar, so long as these can be removed before returning the car. It’s also worth noting that if you do make any temporary modifications to the car, these will need to be reported to your insurance company to ensure your entire vehicle is covered.

##  Leasing With LeaseLoco
LeaseLoco makes it super quick and easy to search through the hottest car and van leasing deals on the market. We want to give you every confidence that you are working with the very best brokers and car dealers, which is why all of our leasing partners have signed our [Ethical Code of Conduct](/ethical-code-of-conduct) and we have the highest advertiser [partner criteria](/partner-criteria) in the industry.

Plus, all of our available deals include…

*	FREE delivery to your door (mainland UK)
*	Manufacturer's warranty
*	Breakdown cover
*	Road tax

If you’ve read the benefits of car leasing here in this guide and think that leasing a car is the best option for you then check out the [hottest deals available](/car-leasing/search) to find one that suits you best. 

## FAQS 

### What are the advantages of car leasing?
Leasing your car allows you to drive a brand new car every few years at a low monthly cost that is fixed for the duration of your contract. As you’re leasing the car, there are no depreciation worries and no hassle of having to sell your car!

### What are the disadvantages of leasing?
You will never own your car when leasing, which is quite important to many people. There is also less flexibility as there are mileage allowances and limitations to modifying the car. It also requires good credit to take out a lease deal and you will need to pass a credit check. 

### Can I pay a lease off early?
If your circumstances have changed, it is possible to end your lease deal early. However, there will be an early exit fee for doing so. We would always recommend checking exactly what this fee would be with our leasing partners if this is something you may need to do.

### What happens when you return a leased car?
At the end of your lease term, all you need to do is hand your car back to the leasing company (who usually will collect it for free). They will check your mileage and inspect the car for any damage beyond fair wear and tear. If you plan ahead, you could potentially get your new car lease delivered at the same time as your old one is being picked up!

This guide highlights all the key benefits when leasing a car.

Car Leasing Benefits | LeaseLoco

Benefits of Leasing A Car

# How Does Car Leasing Work?
Leasing a car works in the same way as leasing or renting a property. You may need to pay an upfront payment and then you will pay a fixed amount of money for an agreed period of time for the car / property. When you rent a flat, it is your landlord that owns it and you live in it until the contract ends and you move out. Leasing a car is very similar as you never own or buy the car, you simply hand it back at the end of the agreement. Car leasing is one of the most affordable and simplest ways to access a new car as the monthly payments are generally cheaper than other car finance options. We discuss the process of car leasing and leasing with LeaseLoco in this guide to help you see whether it may be the right choice for you.

## What Is The Process When Leasing A Car
We understand that often car leasing can seem confusing, especially if this is your first time leasing! So we want to make it as clear as possible and provide a step by step process to ensure you understand how it all works.

### Leasing Process

1.	Choose your car This step is definitely the most fun! Decide what type of car you are looking for; if there are any particular spec options you may want; the colour of the car you want; and if you’re looking for something that’s in stock now or available in a few months with a factory order. 

2.	Decide term agreements Once you have decided on a car you like, and have found a deal you want to go for, the next thing to do is figure out the lease profile that will suit you best. You need to decide how long you want the lease to last (typically the most common lease length is 2-3 years). The next thing to do is decide how much you would like to pay upfront. With car leasing, you have the option to pay 1, 3, 6, 9 or 12 months upfront. This will be completely down to what suits you best. Some people prefer a no deposit deal and will stick with a 1+ profile, while others prefer to pay a higher amount upfront to reduce the monthly payments for the rest of the term. Either way, the total cost of the lease will remain the same. You will also need to choose an annual mileage for the car. If you haven’t chosen your mileage in a car deal before, we have a handy guide with [everything you need to know about annual mileage to help](/guides/contracts-and-finance/everything-you-need-to-know-about-annual-mileage). 

3.	Provide finance details and undergo checks After contacting our leasing partners and discussing a quote with them based on your requirements, they will require you to carry out a number of checks, including a credit check. Once this has all been approved, you will sign some documents including the lease agreement with all the T&Cs included to secure the deal. There may be a one-off broker arrangement fee with some leasing companies that you will pay at this point. 

4.	Delivery of the car Our leasing partners will deliver your car for free straight to your door, arranged on a date that suits you. So you can make all your neighbours jealous as your brand new set of wheels is dropped off! 

5.	Enjoy your brand new car Probably the best part of the leasing process.. You get to enjoy your brand new car and experience all of the latest car technology and features. 

6.	Return your car When your lease comes up to an end, all that happens is you simply hand the car back – which is usually collected for free by our leasing partners. When they do this, they will check some paperwork, check the car is within its mileage limit, and inspect the car for any damage. The car won’t need to be in a brand new condition and general wear and tear won’t constitute for any damage costs to be paid. If you are organised, you could discuss with the leasing company to get a new car delivered at the same time the other is being collected!

It’s also worth noting that insurance is something you will likely need to organise yourself before the delivery date of the car. Every vehicle in the UK is legally required to have insurance and this includes lease cars & vans! It’s very similar to organising insurance for a car you have bought, except that the leasing provider will be the registered owner of the car. This also means that they are responsible for your road tax.

## Leasing With LeaseLoco

Now that you’ve read about how leasing a car works, you can search and compare the huge range of lease deals on offer including:

* [Personal Contract Hire for Cars](/car-leasing/search)
* [Business Contract Hire for Cars](/car-leasing/search/18c90b61779bd7e0ccd7f4f9a96839bf)
* [Business Contract Hire for Vans](/van-leasing/search)

As the UK’s biggest car leasing comparison sire, we are confident that you will find a deal that’s right for you in just a few clicks. We have the highest criteria for on-boarding leasing partners that we advertise on this site to make sure you get to deal with the highest quality companies that are around.

If you’re new to leasing, we have other leasing [guides](/guides), a leasing [blog](/blog) and general [FAQs](/faqs) on leasing available that you may find helpful.

## FAQs

### What are the pros and cons of leasing a car?
The great thing about car leasing is that you can drive a brand new car every few years for a fixed low monthly cost, and there are no depreciation worries and no hassle of selling your car! However, you will never own the car when you lease it, and there is also less flexibility due to mileage allowances and limitations to modifying the car as you wish.

### What happens at the end of a car lease?
At the end of the car lease, you simply hand it back to the leasing company (who will usually collect it for free). They check some paperwork, check the car is within its mileage limit and check there is no major damage beyond fair wear and tear. 

### Does leasing a car hurt your credit?
As car leasing is a form of finance, it will affect your credit score in the same way that a Wi-Fi contract or other monthly payments would. If you don’t make the monthly payments for a car lease on time, then this could negatively impact your credit score. If you’re making your monthly payments on time, then this could improve your credit score. 

### Do you own the car after a lease?
No, when you lease a car you never own it and never get the chance to buy it. With other finance options, such as PCP, there is the option to pay a balloon payment to own the car at the end of the contract, but this is not an option for car leasing. The good thing is that this makes the monthly payments typically a lot cheaper than other car finance options!

If you're leasing a car for the first time, this guide will help provide an insight into what to expect from the leasing process.

Car Leasing Process | LeaseLoco

How Does Car Leasing Work?

# Leasing Vs Buying A Car 
Car leasing is becoming a more and more popular way of financing a brand new car. With an increasing percentage of drivers leasing their cars and an estimated 5 million vehicles on British roads today being leased, according to the BVRLA (2021), it certainly is a credible option.

It can be a tough call to choose between leasing and buying your next car. The decision can often come down to your priorities and circumstances. We’ve put together this handy guide that is all about leasing a car vs buying one that explains all you need to know. 

## What Is The Difference Between Leasing And Buying A Car?
Although both buying and leasing mean that you can drive a brand new car, they are two very different options of car financing. Buying a car means that you will own the car, but you’ll need to have a large cash amount to pay for this or face a significant interest rate. Leasing a car will give you more affordable lower costs but you will never own the car. 

## 8 Differences Between Leasing And Buying A Car
So how exactly does leasing differ from buying a car? We break the top 8 differences down for you. 

### Ownership
You don’t own the car if you lease it, you just pay to use it for a fixed amount of time and then return it for another lease. If you buy the car, you own it and get to keep it for as long as you want and can add any modifications and use it however you want. 

### Upfront costs
When buying a car, you will likely need to put a large amount of money down upfront. Typically as much as 10% upfront is required to get a good finance rate if you’re buying. However, the amount upfront for leasing is flexible and often much less. You can even choose a no deposit deal if this suits you better. 

### Monthly payments
The monthly payments when you buy a car are typically much higher than leasing because you are paying for the entire value of the car.

### Returning the vehicle
When your lease contract comes to an end, all you do is simply hand the car back and organise a new lease deal. If you buy a car, you can own it for as long as you like and when you want to change vehicles, you will have the responsibility of selling or part-exchanging your own car. 

### Depreciation
For a lease deal, the future value of the car will not affect you or your monthly payments. If you buy a car, it will depreciate in value, however, the equity is yours to use as you want to. 

### Mileage
You will agree to an annual mileage restriction with a lease deal and decide how much you can drive the car, with extra charges if you go over this limit (although this can be re-negotiated mid-contract). For a bought car that you own, you can drive it as much as you want to with no restrictions. 

### Modifications
If you own a car you can make any modifications as you wish to the car, such as changing the wheels. If you are leasing, you will need to return the car in the same way that you bought it and any customisations must be removed before doing so. This means you won’t be able to do any permanent alterations to the vehicle. 

### Wear and tear
When you return your lease car, general wear and tear is expected and will not constitute for any damage, but anything worse than this will need to be charged for. So if you’re pretty rough on your cars, you may be better off buying your car, where the only worry for excessive wear and tear is how it will affect the resale value. 

## Leasing Vs Buying: Advantage & Disadvantages
To help you find out whether leasing or buying is the best option for you we look at the pros and cons, starting with the benefits of leasing a car vs buying.

###  Advantages Of Leasing Vs Buying

*	Brand new car every few years
*	Lower upfront payment options
*	Fixed low monthly payments 
* No hassle of selling your car
*	No depreciation worries
* Fewer repair costs

### Disadvantages Of Leasing Vs Buying
As appealing as a lease may be, there are a number of disadvantages:

* Mileage restrictions
* Excessive wear and tear charges
* Early termination fees
*	Never own the car
*	Limits to vehicle modifications 
*	Requires good credit score

## Leasing With LeaseLoco
If after reading this, you’re thinking that leasing a car is the better option for you then you’re in the right place to start looking! Searching and comparing lease deals is really easy to do on LeaseLoco. You can find a deal that meets all your requirements in just a few clicks using the filters on our search page. Whether you’re looking for a family SUV or a small city car, we’re confident you’ll find a deal for you.

Search and compare the hottest [car lease deals](/car-leasing/search) now.

## FAQs	

### Is it better to just lease or buy a car?
At the end of the day, this comes down to personal preferences and financial circumstances. If you like driving new cars for low monthly costs then leasing is a good option. If you want to hold on to your car for more than a few years, it may be a better option to look at buying the car. 

### What happens if you crash a leased car?
If you’re involved in an accident, you will need to tell both your leasing company and your insurance company. Any damage to the car that is covered by your insurance will need to be carried out to the leasing company’s specifications. Once any repairs have been carried out on your lease car, you can be back on the road again. If your car is written off, then the funder of your agreement will provide a settlement figure to end your contract. Your insurance will usually provide you with a fair market value of the car to help cover this, but there can often be a shortfall. In this instance, it may be worth considering [gap insurance](/guides/contracts-and-finance/what-is-gap-insurance-and-do-i-need-it) which would pay the difference in this instance.

Here is a list of all the main differences between leasing and buying a car.

Buying Vs Leasing | LeaseLoco

Buying Vs Leasing A Car

# Personal Vs Business Leasing
If you’re new to leasing, then it may be confusing to understand the difference between personal car leasing (Personal Contract Hire) and business car leasing (Business Contract Hire). Luckily, both options still see the great benefits of leasing with fixed low monthly payments, no depreciation worries, and you get to drive a brand new car (or van) every few years! 

Whether you’re looking for a new [car](/car-leasing/search) or [van](/van-leasing/search), we have plenty of lease deals to choose from. 

## What's The Difference Between Personal & Business Leasing
Personal and business leasing are quite similar, so to help you understand which option is for you, we go over the main differences.

### The name on the lease
The name you use on the agreement is the first difference. If you take out a personal car lease then the agreement will be under your own name. However, for a business lease, it will be the company’s name on all the paperwork.

### The documents
The documents that you provide for each are different as the documents for business leasing should all relate directly to your company. This will include business bank statements, the company address, registration number and other specific company details to be approved by the finance company. With personal leasing, on the other hand, you will need to provide your ID, proof of address and other personal documents. With both options, the funder will require a credit check before approving any lease deal. 

### The tax benefits
Business leasing is VAT recoverable, so you can claim 100% of the VAT back if the vehicle is solely used for business use, or 50% if the car is used for both business and personal use. Personal car leasing will include VAT in all of the monthly payments, so the cost of business leasing can be significantly cheaper. This is one of the biggest benefits of business car leasing, and there is no denying that the low monthly rentals are a great way to drive a brand new vehicle for a minimal expense. 

## Leasing With LeaseLoco
Personal and business leasing are very similar, and the process of leasing is the same. There are just a few differences with setting up the deal and the costs. Either way, you will lease a vehicle for a set amount of time through fixed monthly payments and will return the vehicle at the end of the contract. If you want to read more about business leasing, we have a handy page that covers [what business leasing is, its eligibility and benefits](/business-leasing). 

At LeaseLoco, we compare the hottest [business](/car-leasing/search/18c90b61779bd7e0ccd7f4f9a96839bf) and [personal](/car-leasing/search) deals on the market from high-quality leasing companies. With thousands of options, we’re confident that you’ll find a lease deal that suits your needs. 

Looking for a [van?](/van-leasing/search) We’ve got you covered with our available business van lease deals too!

## FAQs

### Should I do personal or business lease?
Ultimately, the decision comes down to you and your circumstances. With personal leasing, you will need to pass the appropriate checks, including credit checks. This is the same for business leasing but instead of looking at your private history, they will look at your business.

If you are in a position to take out a business lease, you will see cost savings through the tax benefits, which can be a great help for cash flow in the business by paying a fixed monthly rate without the need for a large upfront payment. 

### Is it better to lease a car for business?
There are a lot of benefits to leasing a car for a business as opposed to buying. If you’re involved in a business, you are probably pretty busy. Leasing a car will save you a lot of time and hassle as you won’t need to sell your car when you want a new one – all you do is hand it back and get another lease deal! With a leased vehicle, you don’t have a depreciating asset on your books, unlike you would if you bought a car, which can often make your accounts look better to investors. By having a fixed monthly payment, it is much easier to manage cash flow, freeing up your money to spend elsewhere. 

### How does business leasing a car work?
The process is very similar to personal leasing. To start your search you can view all the available business car lease deals where you can compare the hottest deals on the market. Once you’ve found a deal you like the look of, we’ve made it really easy to contact our leasing partners from the deal page by clicking ‘call’ or ‘message’ and they will be able to talk you through your options and help you secure a deal. 

The process may be slightly different between leasing companies, but the standard practice is that once you have discussed and confirmed a quote, you will complete an application; undergo the appropriate checks; potentially pay a one-off broker fee to secure the deal; organise the delivery of your brand new car. There will also be a final finance agreement to sign, but after this, you just sit back and wait for your car to be delivered for free to your doorstep. 

### Is business leasing cheaper than personal?
Business car leasing tends to be cheaper than personal because personal car lease deals always include VAT within their cost, while business lease deals can claim some (or all) of this VAT back. If you opt for a maintenance package too on your business lease, you can also claim back VAT on this cost.

Wondering what the differences are between personal leasing and business leasing? This guide will help!

Personal Vs Business Leasing | LeaseLoco

Personal Vs Business Leasing

# Guide To Car Leasing
We’ve made this guide to explain everything you need to know about what car leasing is and how it all works. If you’re new to leasing it can be confusing, so hopefully, by the end of this guide, you will be happy and ready to check out our bargain [lease deals](https://www.leaseloco.com/car-leasing/search). 

## What Is Car Leasing?
Leasing a car or van is a similar process to leasing or renting a property. You pay fixed monthly payments for an agreed period of time, as you would when renting a flat from a landlord. At the end of the contract, you simply hand the car back to the leasing company and never own or buy the car. This means that the monthly payments are usually significantly cheaper than other car finance options, meaning you can enjoy driving a brand new car every few years without the worry of it depreciating and having to sell it after time. 

## How Does Leasing Work?
The first thing to do is to start searching for the car you want to lease and find a deal that works best for you. You will need to decide the term agreements that you want for your new car. This includes the length of the contract (usually between 2-4 years), how much you would like to pay upfront and also your annual mileage.
After contacting our leasing partners, they will discuss your quote with you and then you will be required to undergo a few checks, including a credit check. Once this has been approved, then you will sign your lease agreement with the T&Cs and organise the delivery date of your new car. Our leasing partners will deliver your car straight to your doorstep for free. 

Road tax, manufacturer’s warranty and breakdown cover are all included in the cost of the lease deal, which takes some hassle out of your way. Usually, maintenance and servicing are not included in the cost of the lease, but our leasing partners will be more than happy to give you a quote if this is something you would like. Just like buying a car, you will need to organise insurance yourself before the delivery date of your car. This is pretty much the same as organising insurance for a car you have bought, except the registered owner of the car is the leasing company.

Once your car is delivered, then you will begin to pay your monthly payments and get to enjoy your brand new set of wheels! At the end of the lease deal, you simply hand the car back (which is usually collected for free by leasing companies). The car will be checked for any heavy damage beyond fair wear and tear, and that it is within its mileage limit. General wear and tear won’t constitute for any damage costs to be paid as it will never be expected for a car to still be in a brand new condition. 

## What Are The Benefits Of Car Leasing?
There are some incredible advantages to leasing your car with the biggest reason being cost savings. Our [why lease](/why-lease) page breaks down how you can save thousands of pounds by choosing to lease over other car finance options. Leasing also gives people the opportunity to drive a brand new car for low fixed monthly payments that they can afford and budget around. Plus, you can change your car every few years and continue driving brand new cars without the hassle of having to sell your old one. Car leasing is a simple process and takes a lot of the stress away from depreciation worries, paying road tax and selling your car. 

## What Is The Difference Between Buying And Leasing?
There are quite a few differences between buying and leasing, and the option you choose will ultimately come down to your personal preferences and circumstances. 
One of the most obvious things is that with a car lease you will never own the car and you return it at the end of the lease, while if you buy one then it is yours to keep and use however you would like. This means that the upfront costs differ too. If you buy a car, you will likely need to put a large upfront payment down, typically around 10% to get a good rate. Leasing can be more flexible by offering payment profile options, including no deposit options if this suits you, and the monthly payments are significantly cheaper through a car lease.

There are also differences in the way you can use the car. If you buy a car you don’t need to agree to an annual mileage limit and you can make any modifications to your vehicle as you like. With a leased car, any modifications will need to be removed before you return the car so you won’t be able to make any permanent alterations. 

## What Are The Different Leasing Types?
Car leasing is also known as Personal Contract Hire (PCH), and the other type that many people consider is Personal Contract Purchase (PCP), which means the option to buy.

### Personal Contract Hire
PCH is car leasing as we have discussed, where you can drive a brand new car every few years on low monthly payments with no depreciation worries or stress of having to sell the car.

### Personal Contract Purchase
PCP is quite similar to PCH, however, you will get the option to buy the car at the end of the agreement through an optional balloon payment, or have the car back like you would with a lease. As you have the option to buy the car, the monthly payments are usually higher. So if you think you will be returning the car after a few years then PCH will work out cheaper for you. We also have a handy guide on the [differences between PCH and PCP](https://www.leaseloco.com/guides/personal-car-leasing/leasing-vs-pcp-and-hp) and the advantages of each.

## Leasing With LeaseLoco
Making it super quick and easy for you to search for your brand new car lease is our number one goal at LeaseLoco, and we’re confident that you can find a great deal in just a few clicks using the filters on our search page. Once you’ve found a deal you like and have gone through the leasing application and process with our leasing partners, all you need to do is sit back and wait for your brand new car to be delivered to your doorstep. 

Search and compare the hottest [car lease deals](https://www.leaseloco.com/car-leasing/search) on the market now. 


## FAQs	

### Can you buy a car after leasing it?
No, there is no option to buy a car at the end of a lease deal. You simply hand the car back to the company. Our leasing partners will usually collect it for free, so if you plan ahead you could even get your next lease car dropped off at the same time. 

### Is leasing a car cheaper than buying?
Leasing a car can be much cheaper than buying a car because the monthly payments are lower as your entire payment won’t cover the full cost of the car, unlike other methods of paying for a car and buying it. While you never own the car, you will get the regular opportunity to change your car and continue paying low monthly payments.

### What happens if you crash a leased car?
If you are involved in an accident with your lease car, you will need to inform the leasing company and your insurance company. Your insurance company will carry out any repairs covered by your insurance policy and you can then be back on the road again. If the car is completely written off, then the funder will provide a settlement figure to end your lease contract. While your insurance will usually give you a fair market value of the car to help cover this, there can often be a shortfall. For this reason, [gap insurance](/guides/contracts-and-finance/what-is-gap-insurance-and-do-i-need-it) may be worth considering as this would pay the difference of the shortfall on this occasion.

### Is leasing a car the same as renting?
Leasing a car is very similar to renting a property as you don’t ever own the car, you just have it for an agreed period of time, pay fixed monthly payments to the owner and hand it back at the end of the contract. You will need to agree to an annual mileage to lease your car though!

### How long is a car lease?
The most common length for a car lease is 2-3 years, and often 4 years. The length of a car lease depends on personal preferences and budget too, as the monthly prices may vary between different term lengths. There may also be short-term contracts available for those looking to lease for shorter periods.
As we are a price comparison site, the deals supplied to us usually range 2-4 years, with, on the rare occasion, 12 or 18-month terms. However, we don’t have any short term lease deals at the moment, but there will certainly be leasing companies that specialise in these. 

### Is car leasing only for new cars?
All of the cars advertised on LeaseLoco are brand new cars. There may be certain finance companies who will offer lease contracts on second-hand cars, however, the standard practice is that car leasing is for new cars. The even better news is that because the car is brand new it will come with the manufacturer’s warranty included.

If you're thinking of leasing a car for the first time, this guide will provide you with all the info you need.

Guide To Car Leasing | LeaseLoco

Guide to Car Leasing

# What Is A Salary Sacrifice Car Scheme? 
A salary sacrifice car lease is when you ‘sacrifice’ a portion of your salary (before tax) in exchange for a non-cash benefit, such as a brand new lease car. By paying for a car lease from your salary before tax, you are saving on the personal income tax that you would have received if you were paid your salary as normal. The savings and other benefits of a salary sacrifice can be significant for both employees and employers.

A salary sacrifice is most effective with an electric car (or van) because the BIK rate is only 1% in 2021/22 and then will be capped at 2% until 2024/25. For example, if you were looking to get a brand new [Tesla Model 3 lease deal](https://www.leaseloco.com/car-leasing/tesla/model-3) through a salary sacrifice that was £580 per month, through this scheme £580 every month would be deducted from your gross salary. You would then receive your salary and pay tax and NIC from this new reduced salary. This means that you are paying less tax than you would if you had the car amount paid through your salary as normal – saving you a considerable amount of money!

## Advantages And Disadvantages Of The Salary Sacrifice Scheme 
There are a whole bunch of benefits for both employers and employees for a salary sacrifice so we touch base on all the main benefits, as well as the drawbacks, of this scheme to make sure you know what’s in it for you. 

### Advantages Of The Salary Sacrifice Scheme 
#### Savings
The main benefit is that the monthly payments for the car will be reduced and can be much cheaper than getting a car individually. As the car is paid for using your pre-tax income, you don’t have to pay the normal tax or NIC on this and neither will your employer, which can add up to an incredible saving. 

#### Easy process to get a new car
For employees, this scheme means that the employer will be responsible for arranging all of the finance for the car lease. This also means that you won’t be hit with a big upfront fee in the first instance to get the car, and you won’t have to go through a personal credit check. It is a hassle-free way to get a new car as there is no need to work out costs every month as it comes out of your salary. 

#### No financial risk
As the salary sacrifice lease is financed through the employer, you are not tied to a car if you need to leave the company for any reason. This is also an advantage for employers as the employer does not have to keep the car if the employee does leave (as it is paid for by their income).

#### Increase employee retention 
Having a salary sacrifice scheme is an attractive benefit to potential employees and often can increase employee retention by offering a car that can be used for both personal and business usage. Being able to offer your employees a range of cars while also saving them money by doing so is a great way to stand out when recruiting new employees and can significantly improve a company’s image. 

### Disadvantages Of The Salary Sacrifice Scheme 

#### Reduction of salary
There are certain disadvantages to getting a reduced salary. This could potentially impact any credit or mortgage applications; it may affect the level of maternity pay you receive; any life cover offered through your job; pension amounts or potentially salary-based redundancy settlements. Therefore it is important to think about whether this will suit you. 

#### Early termination fees
The finance is the employer’s responsibility, which is good for the employee as they are not tied down to a contract. However, if the employee leaves the company during the lease term agreement, then the employer will be left with the remaining costs for the car and will either need to continue to pay the monthly payments or pay an early termination fee. 

#### Employee leave
If in the instance that an employee takes maternity or a similar leave, the employer will still need to provide the benefit, even though they will no longer be receiving the salary to sacrifice. This is because if an employee is getting statutory maternity pay, the salary cannot be sacrificed from this and the employer would need to cover the costs of the vehicle, which is a risk to consider for employers. 

#### Lower incomes
A salary sacrifice is unlikely to work for people who are on a lower income, as your take-home salary cannot fall under the national minimum wage. 


## Is The Salary Sacrifice Scheme Right For You? 
Getting a car through a salary sacrifice scheme is an excellent way to get a brand new car for a cheaper cost. If you are on a minimum wage contract, or on a wage that would push you below minimum wage once the car amount has been removed from your salary, then this scheme will not be the right one for you. As long as this isn’t you, you can get yourself a brand new car every few years using the scheme. 

The fuel of the car you are looking for may also play a big part in whether this scheme is right for you. As the employee will still need to pay Benefit in Kind (BiK) for the car, an electric car is a much cheaper option. This is because BiK rates for EVs are 1% for 2021-22 and will be going up to 2% after this. For other cars, including petrol and diesel, this BiK rate can go up to 37% for cars that produce over 170g/km of CO2, which can be quite costly. This means that the salary sacrifice will be significantly cheaper for electric vehicles and is best for green vehicles with emissions under 75g/km of CO2. 

If you’re not too sure if this is for you and would like to know other alternatives to a salary sacrifice, then our guide on [company car or car allowance](https://www.leaseloco.com/guides/personal-car-leasing/company-car-or-car-allowance) is worth reading to learn more.

## Do You Pay Tax On Salary Sacrifice Cars? 
A salary sacrifice lets you pay for a car every month using your gross salary before it is taxed and other contributions are deducted from it, so you don’t pay tax on the portion of salary that is being used to pay for the car. That said, you will need to pay Benefit in Kind tax, which is incredibly low at 1% in 2021/22 and 2% after this for electric cars, although, it can be much higher for petrol and diesel cars. This means that the scheme is the most cost-effective with [electric cars](https://www.leaseloco.com/electric-car-leasing).

## Can I Salary Sacrifice Two Cars?
Yes, you can have more than one car under the salary sacrifice scheme provided that the salary that has been sacrificed does not fall below minimum wage, and of course as long as your employer approves your request for more than one car under the scheme. 

If you think that a salary sacrifice scheme would be a great benefit for you, LeaseLoco has the hottest [car leasing deals](/car-leasing/search) on the market and make it super quick and easy for you to find the perfect deal for you in just a few clicks.

Wondering what the salary sacrifice car scheme is and whether it's right for you or your employees? We reveal the pros and cons in this helpful guide.

What Is A Salary Sacrifice Car Scheme?

There are a few different ways to finance a brand new car or van. You may have considered a PCP or a hire purchase, but have never really understood what the difference between the two is. Another option to add to the mix is leasing, and with every finance method having its differences – it’s important to understand these! Once you fully understand the different options, it will become much easier to decide which finance option is the right one for you.    

## What Does Leasing Mean?
Car leasing is also commonly known as Personal Contract Hire (PCH). For a car lease, you will choose an upfront payment amount (either one month, 3, 6, 9 or 12 months upfront); you will choose the term length of the lease, and you will choose your annual mileage amount. Then you will pay fixed monthly amounts for the length of the lease term that you have decided. 

You can think of leasing as a similar concept to renting a property. You pay a deposit or upfront amount, and then pay monthly payments for the length of the lease. Similar to the landlord owning the property, with car leasing you do not own the car or buy it at the end of the contract – you simply hand it back! The landlord will usually inspect the flat, as well as the leasing company for the car. As long as your car has not gone beyond the BVRLA guidelines to acceptable wear and tear; and that you have not gone over the agreed mileage amount, there will be no further costs.

## What Does PCP Mean?
PCP stands for Personal Contract Purchase. PCP is a way of financing your vehicle as opposed to buying it outright. PCP financing can be broken down into three parts; the deposit, the monthly payments and the choice at the end.

For the deposit, you will pay a sum at the beginning before you get the car, which you can choose how much you would like to pay and then the monthly payments will be calculated from the deposit paid, mileage amount and the balloon payment at the end. 

At the end of the agreement, there are a few options with a PCP. The first option is to keep the car to own and pay the balloon payment, which is a lump sum that you can pay in one go or re-finance the amount. The second option is to simply hand the car back with nothing to pay. The final option is to part exchange your car and you can use any equity as a deposit on another vehicle.

## What Does HP Mean?
Hire Purchase (HP) is a way of financing a car where you will usually pay an initial deposit and then go on to pay off the entire value of the car in monthly instalments. At the end, once all the instalments have been made, then the HP ends and you will own the car. This is another popular way of buying a new car as essentially you are hiring the car, while paying for it, to purchase it at the end of the deal. 

The amount that you choose to pay upfront will determine the amount of the monthly instalments, and the interest is calculated at the start of the agreement and added to the finance deal. This means that the payments are fixed during the agreement. The deposit for a HP deal will usually be around 10% of the total value of the car, although similar to leasing and PCP finance, the customer can choose to pay more or less upfront to best suit their needs. 

## What's The Difference Between Leasing, PCP And HP?
It can be a bit confusing to understand exactly what differentiates each finance option and how they all work. We outline the main differences between PCP vs leasing and HP for you to help you decide which method of financing your car is right for you. 

### Owning the car
With a car lease, you never own the car, and will never get an option to purchase it at the end. You simply hand back the car and can take out another lease deal (if you’re organised you can get a new car delivered the same day your old one is getting picked up!) With a HP deal, you are paying the car off in monthly instalments and will own it at the end of the contract. The major difference between PCP and HP is that with a PCP deal you will get the option to either buy the car with a final balloon payment and own it, or hand it back instead. 

### Mileage allowance
With both leasing and PCP, there are mileage allowances. For a PCP, the lump sum at the end is calculated at the end based on what the estimated value of the vehicle is from the mileage you have stated that you will do over the PCP deal. Leasing is similar and the monthly payments are calculated based on how many miles you have stated you will do over the term. With HP you are not tied to mileage limits as you are buying the car in instalments. 

### APR rates
The Annual Percentage Rate (APR) interest rate is something you will need to consider if you are getting a PCP or HP deal, that you wouldn’t have to with a car lease. This interest rate is calculated as you are borrowing money from the funder to finance the car as opposed to buying it outright. The APR rate on a PCP will usually be around 4-8%, although it can be higher so always best to double-check. For a car lease, any interest rates are usually already calculated into the monthly payments. Leasing companies usually won’t show this on the contract but if you’d like to find out you can always ask them. This interest rate is calculated from the car you are paying for, the term length and your credit rating. It is possible to get a deal with no interest, but you would usually have to pay a higher deposit for these. 

### Monthly payments
The monthly payments will tend to be the cheapest with leasing as it is all about the depreciation of the vehicle. The payments are the cheapest, although you do need to agree on an annual mileage and there is no option to buy the vehicle. With HP and PCP contracts, the monthly payments are typically more expensive.

### Handing the car back
One way of understanding the difference between PCP vs lease vs HP is when you hand the car back. Leasing is simple, you hand the car back when your agreement comes to an end after the term you decided at the beginning (typically 2 or 3 years). With HP you will keep the car once you have paid it off. Finally, with a PCP deal, you get the option to either return the car; pay a final balloon payment to keep the car; or part exchange the car. 

Alex and Oliver explain the difference between PCP, lease purchase (HP) and contract hire (leasing) in a quick video. (include the embedded video here)

## Pros And Cons Of Leasing Over PCP And HP
So what are the advantages and disadvantages of leasing over PCP and HP agreements? We take a look at the pros and cons to help you figure out if leasing a brand new car or van is the right choice for you.

### Pros Of Leasing Over PCP And HP
#### Never sell your car again
With Hire Purchase and PCP, there will probably come a time where you are going to want/need a new car and will need to go through a bit of hassle with trying to sell your car. With leasing, you don’t own the car so you don’t ever need to sell it, you simply hand it back. Therefore, there is no hassle at the end of the term to worry about. What’s great is that you can get a brand new car every few years and will be able to afford a slightly more expensive car. 

#### Fixed monthly payments
You don’t need to worry about interest rates throughout the lease term as your payments are fixed and won’t change. There are no hidden charges – you simply agree on the monthly payments and that’s it! Even if the government massively increases tax on diesels while you’re in the middle of a contract, it won’t affect you. 

#### Flexibility 
Lease contracts are becoming more and more flexible these days. Our leasing partners and their funders understand that circumstances change, and you can often end the lease early without needing to pay the lease in full. It is also pretty straightforward if you’d like to renegotiate your mileage if you’re doing more or less than expected.

#### Cost 
The number one benefit for leasing vs PCP and HP is that the monthly amounts will usually be much less. Our [‘Why Lease’](/why-lease) page explains in detail how you could save £7,730.02 over the course of the lease term over the PCP deal with an Audi A4 Avant deal. Leasing is the most affordable way to drive a brand new car, often a better car than you would expect.

### Cons Of Leasing Over PCP And HP

#### Mileage restrictions
You will select your mileage at the beginning of the lease agreement. If you go over this mileage then there will be an excess mileage charge, or you will need to have renegotiated your mileage before you go over it. Although, excess mileage charges typically range from around 3p to 30p per mile, with the most common charge being around 7p per mile. So, if you do go over your agreed mileage, it isn’t a major issue at all. 
If you believe you may go over your mileage limit, let us know and our leasing partners will happily be able to assess your mileage requirements and renegotiate a new monthly amount as you need.

#### Never own the car 
When you lease a car you will never ‘own’ it, as it is a long-term hire where the car belongs to the leasing company. So you will never own the vehicle and have nothing to sell by the end of it. Once the lease deal is over, you will need to get a new car.

#### Wear and tear restrictions 
You will need to take care of your lease vehicle and ensure that by the end of the lease, it is to the standard set of the [BVRLA guidelines](https://www.bvrla.co.uk/guidance/fair-wear-tear.html) for what is deemed acceptable for fair wear and tear. If you’ve taken care of your car and there is just normal wear and tear then you will not have to pay anything at the end. However, if it goes beyond the BVRLA guidelines and isn’t repaired before being returned then you may face a charge.


## Which Car Finance Option Is Right For Me?
There are pros and cons to each car finance option, so it’s best to have a good think about which option is the best one for you. If you are considering all three options, we highlight our top things to consider when deciding.

### How do you plan to use the car?
With leasing and PCP, you will need to stick to an annual mileage that you have agreed for the term. If you’re someone who doesn’t want to estimate their annual mileage and uses your car for longer commutes, it may be best to consider HP as you won’t be tied down to mileage. With HP deals you also don’t need to stress about minor damage to the car, whereas with PCP and leases you need to consider the wear & tear guidelines. Although, with leasing, you’re covered by the manufacturer’s warranty if anything goes wrong with the car.

### Do you want to own the car?
For many people, this doesn’t matter, but if owning a car or van is extremely important to you then it may be better to opt for a PCP or HP. If you’re not too bothered about owning the car, then leasing is a good choice. It means that you are not left with a depreciating asset that you will eventually want to sell as it ages and requires more and more repairs. 

### What car do you want?
Leasing will be the best option if you enjoy driving new cars regularly and getting to benefit from the latest models and car specs. Car leases only offer brand new vehicles, so if you’re looking for a second-hand car then you will need to opt for a PCP or HP deal.

If you’ve read this guide and decided that leasing is the right car finance option for you, then head to our [search page](/car-leasing/search) where you can compare the hottest lease deals on the market and find your perfect deal in just a few clicks.

So, what’s the difference between leasing, PCP and HP? And which one is the best for you? This guide will help you make sense of the three.

Leasing Vs PCP And HP

If you’re recently found yourself a new job and been offered the nice benefit of either a company car or a car allowance, then you might be wondering which option is right for you. It’s not quite as straightforward as picking out a car you like and driving off, as there are a few factors that come into play. There are advantages and disadvantages to both, but it is likely to come down to personal preference. 

To find out which option is best for you, it helps to understand the difference between them and the implications for each one. We’ve created this guide so you can read exactly what you need to know about company cars and car allowance.

## Company Car or Car Allowance – What’s the difference? 
The difference between a company car and car allowance is simply that a company car is when your employer provides you with a vehicle to use, while a car allowance is an amount of cash that you receive in your salary that you can use to buy or [lease a car](/why-lease). 

There is no set rule as to how much an employer needs to pay for a company car allowance, but it usually covers what the employer would pay to lease a company car including the mileage. Of course, you have the responsibility for looking after the car on both options, although, the difference is that for car allowance you are also responsible for handling payments and any costs, whereas with a company car your employer will handle these.

## 4 Advantages of a Company Car 
There are a number of advantages for receiving a company car from your employer.

### Employer is responsible for driving costs
Your employer will typically pay for maintenance, servicing, insurance, breakdown cover etc, meaning that there is a lot of hassle that you don’t need to worry about and no unexpected costs if these are covered by the agreement. 

### Not tied down to a contract
You’re not personally tied into a financial contract if you get a company car, and everything will be in your employer’s name. So, if there is an occasion where you need to leave the company, then you will not be stuck in an agreement with the car.

### No depreciation worries
Similar to when you lease a car, you don’t need to worry about and depreciation costs, as you never own the vehicle yourself and the vehicle losing value over time will not impact you financially. This also means that you don’t have the hassle of needing to sell your car in the future, and potentially saves you a lot of money.

### Brand new car every few years
Company cars are typically renewed and updated every few years meaning you’ll always be driving a new car and will get to benefit from the latest technology that the car market offers.

## 4 Disadvantages of a Company Car 
Of course, while a company car is an excellent benefit to receive, there are disadvantages for this option too.

### Less opportunity to choose your car
While some employers will give you an option for your company car, you may not be given the choice of your car. This often means that you won’t be able to get any upgrades or modifications if you’re looking for a better vehicle. Choosing your car is more important to some people than others and is often a major deal-breaker when choosing between a few options.

### Never own the car 
The vehicle will belong to the company, so if you decide to leave your company you won’t get to take the car with you. This can be a bit heart-breaking if you come to love your car and don’t want to part ways with it. You may also need to search for a new car quickly if your new job does not offer a similar scheme.

### Heavy tax payments 
You may face a high BIK tax rate if your employer decides to opt for a really nice car that has high CO2 emissions, which can be quite costly. There is also Fuel benefit tax to think about. Your employer may include fuel in your car package, which means you will need to pay fuel benefit tax if your employer does not cover this.

## 4 Advantages of a Car Allowance 
Here are the main benefits to getting a car allowance as this becomes an increasingly strong choice for many employers and employees, who will both see the benefits of this.

### Ability to choose your own vehicle 
As you are given a cash boost to sort your own vehicle yourself, as opposed to being given a company car, you get the freedom to choose your own vehicle. This also means you can add on any options as you like, such as opting for the Tech Pack or Comfort & Sound Pack for a brand new [Audi A6](/car-leasing/audi/a6). 

### Will never have to give the car up
If you end up leaving the company, the car is in your hands and is your responsibility, so you won’t have to give it back. As it is your responsibility, this also means you can choose whether to buy or lease your brand-new car and choose the length of the contact you opt for. 

### Lower tax costs 
You will often pay lower tax costs as you won’t have to pay company car tax on your vehicle as you usually would have to with a company car.

### Cash allowance if you already have car
If you already own your car, you could use this cash allowance for other things such as upgrading your car, car insurance, maintenance or current lease payments if you are leasing your car. Therefore, car allowance can be a useful incentive if you already own your car to use on other financial responsibilities.

## 4 Disadvantages of a Car Allowance 
Similar to a company car, there are also disadvantages with this choice too that it is important to be aware of when thinking about which choice is the right one for you.

### Responsible for financing the car
Getting a car allowance will mean that you will need to take out a finance agreement in your own name. This is a pretty serious and important thing to manage correctly as it could have a detrimental impact on your finances if you don’t. This also means that if you leave the business, you need to continue to meet the costs of the car yourself. Some people may prefer their employer to take a car out in their name instead. 

### Need to record mileage and expenses
As you are the one who has taken out the car, that may also be used for personal usage, you will need to be in charge of recording all of your business mileage and expenses. You will be able to claim back on your business mileage, although the amount you can claim back decreases per mile after the first 10,000 miles. This means that if you drive a lot of miles, you may be losing out from the tax you can claim back.

### Other costs are your responsibility 
There are other costs to consider. For example, you will need to pay for insurance, maintenance, servicing and road tax and organise this all yourself. These costs may mean that the amount you can spend on the physical car itself is reduced. Although it’s worth noting that if you choose to lease your car, road tax, manufacturer’s warranty and breakdown cover are all included in the cost of the lease. This may be a factor of [why you may choose to lease](/why-lease) your car through a car allowance. 

Of course, with most decisions such as choosing whether a company car or car allowance is right for you, it will come down to personal circumstances, preferences and your requirements. A major factor could be which one saves the most money, or it could be getting to choose your own car freely. Whether you go for a company car or car allowance, the decision is up to you. If you have any questions at all, our live chat team will be happy to help. 

If you’re keen to look at your options for a car lease, head to our [search page](/car-leasing/search) where you can view the hottest car lease deals on the market and narrow down the results to see all our available [business lease deals](/car-leasing/search/18c90b61779bd7e0ccd7f4f9a96839bf).

Are you an employee or employer wondering which company car scheme is the best for you? We explore the pros and cons of each in this guide.

Personal Car Leasing