Pros and cons of leasing a car

There are plenty of options these days when it comes to paying for your car, and leasing is becoming ever more common. So why is it gaining popularity and what are the pros and cons of leasing?

Leasing, or Personal Contract Hire (PCH), is similar in a lot of ways to Personal Contract Purchase (PCP). Both require an up-front deposit followed by a series of monthly payments over a specific amount of time, and both will have a mileage limit imposed. The difference with PCH, is that you won’t own the car at the end. You simply return it and have the option to start again with a new car or walk away.

For more information about leasing, check out our useful guide.

Advantages of car leasing

Leasing a car could be the perfect way for you to drive home in a brand new car. These are some advantages of leasing your next car.

Lower monthly payments

Leasing allows you to get a brand-new car on your driveway for what is usually a lower monthly cost than other finance methods. Because you’re essentially renting the car, you don’t have to worry about depreciation and can just change into another new car at the end of the rental period.

Most lease deals are only two or three years long, with no pressure to buy the car at the end of the agreement.

No long term commitments

At the end of your lease contract, all you have to do is hand the car back with no further fees (providing you’ve kept to the T&Cs – more on that later), or you can start again with a new contract on a new car.

It means you’re not tied down to a long contract and there’s very little long-term commitment involved. You’re free to move on without having the hassle of selling or trading the car.

Minimal maintenance costs

Because PCH deals are on brand-new cars, they’re still covered under the manufacturer’s warranty. The length of the contract normally means that the car is warrantied for the entire duration, so you don’t have to worry about potentially expensive repair bills. New cars are far less likely to have faults but, if something does come up, the lease company should sort it out and get it back to best condition.

You might be offered ‘gap insurance’ as part of the contract. This is there to cover the cost of your remaining finance agreement if the car is stolen or written off.

The monthly costs of leasing a car can often be lower than the costs involved in PCP finance deals, because you don’t have the option to buy the car at the end of your finance agreement.

Think of it as renting the car for a couple of years, like renting a house instead of paying mortgage payments. Besides the initial rental (which is sometimes cheaper than a finance deposit), there aren’t any extra charges and it means you can drive a new car, or a more expensive and better-equipped car, for less money than you might expect.

Disadvantages of car leasing

There are some situations where leasing a car may not be the best option. Here are some disadvantages to leasing a car.

You never own your car

Just like with renting a house instead of buying it, you won’t own your leased car. The payments are lower for a reason – you get nothing back at the end of the agreement. One of the major benefits of buying a car on some finance agreements is the possibility of being able to drive it without any extra costs after you’ve paid off the entire finance amount, whereas you’ll always be paying for a lease.

You’ll be charged for damage

You’ll need to make sure any damage is repaired before you hand your lease car back. While you probably won’t have to pay for mechanical elements that are covered by the warranty, the leasing company will expect the car to be returned in good condition and so you’ll get charged if you give it back in a bit of a state. Similarly, you’ll be shelling out if you exceed the mileage limits set out in your contract.

Terms and conditions

The terms of a lease are quite restrictive. As well as these potential extra charges, you’ll have to pay more if you want to hand the car back before the end of the contract, which can be a substantial amount. The lender will also want to make sure you can manage the monthly repayments, so you could be subjected to a thorough credit history check and may be rejected from a lease deal if your score isn’t deemed high enough – but this is also the case for other forms of car finance.

You’ll also have a mileage limit to consider with a lease deal, because your monthly cost will be calculated based on how much the car will be worth at the end of the agreement. The mileage limit will be agreed at the start of your contract, and there will be a fee for going over it. This is usually a penalty cost per mile over the limit.

Finally, you’re not allowed to make any modifications to the car or, if you do, you have to make sure the car is returned in the same condition and with the same equipment as when you started the lease.

Should I lease a car?

Leasing could be the perfect way into driving a new car and avoiding the hassle of selling it when you don’t want it anymore. However, it’s not for everyone, so you’ll need to weigh up whether it’s for you and if you like the look of it.

A lease deal could be the way forward if you:

• Like to change your car every 2-3 years for a new one
• Don’t want to have to worry about depreciation
• Want a lower monthly payment than you’d get with other types of finance
• Want maintenance costs to be kept to a minimum.

A lease deal may not be right for you if:

• You want to own your car
• You don’t want to worry about a mileage limit
• You like to keep your cars for a long time
• Your planning on modifying the car

The good news is that there are plenty of options out there for financing your next car. If you’re set on owning your car at the end of the agreement with no mileage limits, you may want to consider a Hire Purchase agreement.

Or, if you’d like some options as to what you want to do when your contract runs out, you may be better off with a Personal Contract Purchase (PCP) agreement. You can find out more about these types of finance by checking out our handy comparison guide.

If you’re looking for a great lease deal on your next car, you can compare offers now through carwow. Simply use our configurator to tell us what car you want, then sit back and relax as our trusted dealers come back to you with their best prices.