Why Lease When You Could Buy?

Most people I know wouldn't entertain the idea of leasing a car rather than buying one as they assume that car leasing is an expensive alternative to buying. However this isn't necessarily the case when all the factors are considered. Firstly, people will get 'car lease' or 'contract car hire' mixed up with 'car hire'. Hiring a car for a day or a week is far more expensive than leasing a car over a much longer period of time, usually 12, 24 or 36 months, so leasing a car and hiring a car are two very different things.

The second thing to consider is that most people do not have the funding to purchase a new car outright, so the price in the car window will rise significantly when financing is thrown in to the deal. This is where car leasing becomes a much more attractive alternative to buying with a financing deal as the monthly payments can often be cheaper when leasing.

“But I still won't own the car.” is a fair comment and worthy of consideration too. Depending on the terms of the lease, not owning the car could be a godsend. It's a well known fact that a brand new car will loose around 15% of its sale price within a few minutes of driving it off the garage forecourt. So that £10,000 car you bought five minutes ago is now worth around £8,500. With car leasing, the brand new car you've just driven off the forecourt has cost the leasing company £1,500 through the notorious instant depreciation, so it's not your problem.

“But after the lease has ended I'll have to give it back.” Of course you will, and that's the beauty of contract car hire. Going back to depreciation for moment; a brand new car drops in value by say 15% within minutes. After one year it will drop a further 15-20%. After year two it will drop by another 15-20% and by year three you'll be lucky to get 40% of what you originally paid for it. Now you may be thinking that that 40% is still money in your pocket, but factoring in the cost of the financing which you've been paying in addition to the retail cost of the car, it's more like 20-30%, and that's not considering any repairs (which should hopefully be minimal on a new car) or annual insurance costs!

Contract car hire often includes the insurance, as the car is still the property of the leasing company, so it makes sense for them to ensure all their leased cars are properly insured. As you can see, there are many reasons why you should consider leasing a car rather than buying one. You still get to drive a brand new car without the worry of its value plummeting. You wont get lumbered with unexpected insurance bills as this is usually built in to your monthly payment and after the lease has ended, you just give the car back along with all the minor faults and scratches it's gained which will further harm its resale value.