Car Leasing: Is it worth it?
Yes, car leasing is indeed worth it if you know what you’re doing and what you’re getting into. Car leasing, especially in the U.K. is pretty advantageous for a variety of reasons. First and foremost being peace of mind and reliability. Getting a cheap car lease deal, even if you’re missing out on a bunch of premium features, can help you out tremendously due to it being mostly worry free.
When compared to buying an older car that you will keep for a small amount of time, a leasing contract could be even cheaper. At the very least it will give you the peace of mind that your leased car won’t break down in the middle of nowhere – if it does you are covered and have the manufacturer’s warranty.
How does car leasing work?
The concept is simple – instead of buying the car, you lease it. By leasing it you’re basically renting the car on a fraction of the cost. After the lease is done, you’re free to go and get another lease on another car.
A car lease (otherwise known as Personal Contract Hire or PCH) is, simply explained, a form of a rental contract. You’re renting the car (leasing it) for a period of time (3 years, as an example) where you pay a monthly fee. After the contract is over, you hand back the car. On top of the monthly fee, you also need to pay a sum of money when starting your new car lease deal, which varies from car to car and leasing company.
What are the pros and cons of a car leasing service?
Well, the pros are straightforward:
The disadvantages of car leasing are as follow:
What is a real example of a car lease?
Well, let’s consider a quick example of a 2021 Volkswagen Polo on a 4-year car leasing contract for 10,000 miles annually. For this particular contract I found an offer close to £160 a month and an initial payment of just under £1,400. On top of that you will need to pay an arrangement fee of around £200, however, the Road Tax and Breakdown Cover are already paid and included in the costs PLUS there’s currently a hot offer of 1 year’s free insurance on this model.*
Another cost to think about here is insurance, valued at around £600 or so a year, up to £800 if you’re younger. Adding these together, for the whole ownership you’re paying around £11,080 over the 4 years.
On the other hand, let’s assume that we’re buying an older car and keeping it for 4 years. A 2012 Volkswagen Polo with a similar powertrain costs around £5,000. On top of this you have the £800 insurance. Also, you’ll need to pay the road tax, valued at around £200 yearly. Summing it up we are already reaching around £8,000 over the 4 years.
Now, this doesn’t take into consideration the fact that you have no warranty on the car, and maintenance which adds around £1,000, especially if you don’t do it yourself.
Knowing this, the cost of leasing a car isn’t as striking.
With car leasing, you’re living worry free. Even if the car is a lemon, everything will be fine because you’re covered. In contrast, you’re keeping a car after 4 years and might save a bit of money in the process by not leasing but it could be totally unreliable and cost a lot more in repairs.
What’s the biggest drawback of car leasing?
In my eyes, the biggest drawback is that after the lease ends you will have to start over and find a new car worth leasing. By buying an older and reliable car, found after countless hours of researching, you could save quite a bit of money via repairs (every car out there needs repairs, remember that) while also owning the vehicle.
Furthermore, you also have the problem of the mileage cap on a lease car. If you’re commuting often using the motorway, then driving more than 10,000 miles per year is expected. In this case, the lease would get even more expensive, creating a bigger gap between the leasing vs buying calculations.
What are the biggest benefits of car leasing?
There are several benefits of leasing a car. One of them is the ability to drive multiple cars throughout the years and get a feel of different brands, pretty much hassle-free.
After leasing 3-4 cars, you have a general idea what manufacturer is the best of that bunch and you can make a well-informed decision regarding your future leases or purchase.
Another major advantage is that you’re pretty safe regarding the future from the get-go. If anything happens regarding older cars, from being banned in certain places to getting taxed even more heavily for certain fuel types, you’re safe because the car you’re driving is covered by this change. These are some of the undeniable major upsides of personal car leasing.
What Leasing Options do you have?
Whilst car leasing (PCH) can be a cheap, flexible way to access a car without committing to buying a car outright, it is not the only option available to you. There are other options to ‘rent’ a car without actually owning it.
Personal Contract Purchase (PCP for short) is another route you could go down. PCP finance is similar to PCH but is more flexible in terms of deposit and it gives you more choices at the end of your contract. You can buy the car if you love it, you can part-exchange it for a new car or you can hand it back to the finance company and walk away.
So, is car leasing worth it?
I hope you feel more confident about leasing now. Please let me know in the comments below if you found this helpful or feel free to ask any further questions you may have.