Car Leasing Vs Buying – what is the difference?

Very often, when purchasing a new car, people are faced with the decision of whether to lease or buy their next vehicle.  They will automatically ask themselves the question – is car leasing better than buying?

The answer?  Well, it’s very subjective and is really down to the specific needs of the individual making the purchase.

Essentially, they are two different methods of financing your next car purchase – a loan will finance the purchase of the vehicle, whereas leasing will finance the use of it – deciding which option to take will depend on a number of factors – do you want a new car every 2/3 years with low repair and maintenance risk?  Would you prefer full ownership and a long term saving over low monthly payments?

To help you fully understand the difference – if you are to buy a car, you pay for the full cost regardless of how many miles you will drive in it.  Generally, a car buyer would make a down payment and then cover the rest of the value and additional costs incurred via a long term loan.  The car is then yours to do with as you please – sell it at a later date or part exchange it at its depreciated value. If you are to lease a car, you are paying for a fraction of the car’s value – that which you will use during the term of the lease.  At the end of this, you may return the vehicle with no obligation to buy.

The best way to think about it is this – the short term cost of leasing is generally less than that of buying whilst the long term cost of buying is less than that of leasing.  After that, it’s more than likely to be a question of full time ownership vs a new car every 2/3 years.  In any case, there is no definitive answer to suggest which one is best, that’s entirely up to you, but be sure to fully understand the difference before making your decision.