Leasing a Car vs Buying

  • By Michael McKean
  • 7 min read

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

Somebody making a debit card payment.

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.

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 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 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


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.

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