Is it better to buy a car or to lease?
There are a range of ways to fund your next car, including leasing. Personal contract hire (PCH) is the main method of leasing and it involves paying a deposit followed by a monthly rental fee for a set period of time. At the end of a lease agreement, you will return the car whereas with buying, you will become the owner of the vehicle. You can purchase a car in a number of ways: by paying cash outright, by taking out a bank loan, or with a hire purchase (HP) finance agreement.
Rix Motors is a large car supermarket and car finance specialist in Warrington, and we have a number of vehicle funding options available. Here we will look at the pros and cons of leasing and buying to help you decide how to pay for your next car.
Pros and cons of leasing a car
With leasing, you will be able to pay in monthly installments which makes payment more manageable than buying a car outright. As you will not be paying the full cost of the vehicle, only hiring it, your monthly payments will be lower than the repayments you would make with a finance agreement or bank loan.
Another advantage of leasing a vehicle is that they are often short-term agreements, typically lasting no more than three years. This means that you will have the opportunity to change your car on a regular basis, to get the newest versions and technology.
On the other hand, with leasing, you won’t get the option to own the vehicle if you really like it. You may be able to extend your lease for a brief period but ultimately, you will have to return it, so after all of your payments, you won’t have any assets to keep or sell on.
As you will be returning the car and the end of your contract period, leasing agreements usually include mileage caps, and if you exceed the set limit, you are likely to incur additional charges. The same goes for any excessive wear and tear or damage to the vehicle.
Pros and cons of buying a car
When you purchase a car, either with cash outright or with a credit agreement, you will become the legal owner of the vehicle. Because you will not be returning the vehicle, you will not have to worry about any mileage restrictions, and you’ll have more freedom to use it as you please.
Owning a vehicle does not necessarily mean that you can’t change it in a few years if you decide you want to try something new. If you buy a car outright, the car will be yours straight away and you can keep it or sell it. As it will be your asset, you will get to keep the money that you sell your car for and you can put this toward a new vehicle. A bank loan will not be secured against the vehicle, so you will also be the owner straight away and you will be able to sell it whenever you wish. If you choose to buy a car with a hire purchase agreement, you can still end the agreement and swap your car before you have made all of the repayments, you will just need to get a settlement figure from your finance provider and cover this cost before returning the vehicle.
The downside to buying a car is that it will be more expensive. If you plan to pay with cash, you may have to spend time saving up to be able to afford the car you want. If you are financing, your monthly payments will be higher than they would with a lease agreement.
Another consideration is the depreciation of the vehicle. This wouldn’t affect you if you were leasing but when you come to sell a vehicle that you have bought, you will find that it has lost value over time.
To find out more about the different methods of funding a vehicle, contact the Rix Motors team and our experts will talk you through the available options. If you wish to apply for used car finance in Warrington, complete our online application process to get started!