Superficially, leasing a vehicle and buying a car on finance seem similar. In both instances, motorists pay for their vehicles in monthly instalments.
However, there are compelling reasons why leasing is actually better than other financing options for some drivers, as we explain below.
Buying on Finance Versus Leasing: What’s The Difference?
When you buy a car on finance, you take out a loan from a lender to pay the dealership and then repay it over a given period, perhaps 60 months. Like other loans, you must repay both the principal (the money you used to buy the car) and the interest. At the end of the payment period, you own the vehicle.
Leasing a car is different. When you lease a vehicle, you pay fixed monthly payments. However, unlike financing, you do not own the vehicle at the end of the term. Instead, you get the option to take out a lease on a new vehicle and start the process over again.
Why Leasing Is Better Than Conventional Finance
While not owning the car might seem like a negative, there are actually compelling reasons to choose leasing from sites such as https://www.carleasing-online.co.uk/ over car finance.
Lease Payments Are Lower
Because you’re not repaying the principal, monthly costs tend to be substantially lower on a lease. Payments cover the wear and tear of the vehicle and the value you derive from driving it but, critically, not the capital expense.
Savings can be substantial. As an example, buying a vehicle on finance might cost £500 per month, while leasing it over a three-year term might only set you back £350 per month.
Get A Brand New Vehicle at the End of the Term
At the end of a conventional car finance term, what do you have? Essentially, you’re left with a depreciating asset – a vehicle that is worth far less than it was when you bought it.
When you lease, though, it’s different. You come to the end of the term and then have the option to immediately start a lease in a brand new vehicle. This way, you only ever drive new cars and avoid common older car problems, such as breakdowns.
Furthermore, you get access to the latest vehicle features such as lane assist, park assist, collision warnings and more.
No Need To Sell
Lastly, car selling costs can be quite high. Dealerships and online sellers take a fee for their trouble. Hence, the residual value of your vehicle at the end of a traditional finance scheme is usually less than the going market price.
Again, leasing lets you avoid these costs. You don’t have to resell the car once you finish with it. You just return the car and the dealer then sells it on.
In summary, leasing is probably a better option than conventional car finance for the majority of motorists. It lowers costs, allows you to drive new vehicles indefinitely, and eliminates resale worries.