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When it comes to selecting a car, there are many questions that need to be asked, and answered, before you can make your final decision. However, at the onset of your car search journey, you may be wondering: Should I buy or lease my next car? And we’re here weigh up both options.

Although the options available may seem similar in nature - with set terms and monthly repayments - the truth is, leasing works differently from other car financing options in many ways.&nbsp;

Whilst leasing a car may prove to be cheaper in the short run than buying one, there are many other factors that need to be considered.

Caruno is here to assist you with all your car leasing needs. We’d like to help you understand the factors involved in leasing or buying a car, the possible risks, and benefits, along with other considerations. So, let’s take a closer look…

Buying a car comes with its own list of pros and cons:

Perhaps the strongest point for buying a car, is that you’ll become the legal owner of the vehicle. Whether you decide to purchase the car outright or through finance, you’ll ultimately own it.

Buying a car means no mileage restrictions. You’re free to drive around as often as you like, for as long as you like, clocking as many miles as you like on the odometer.

Buying a car means that you won’t be penalised for any damage. However, the car’s upkeep and condition falls on you and you will be responsible for ensuring its regular servicing and other maintenance.

When you buy a car, you own it. This means you can make as many changes to the car’s appearance as you like – within legal boundaries.

5.&nbsp;Buyer protection on finance

Depending on what financing option you choose, and the individual finance company, you’ll have the option to hand the car back early if you can no longer afford the monthly repayments. This is known as voluntary termination (VT), a consumer right&nbsp;that is built into every regulated hire purchase&nbsp;(HP) car finance agreement. If you have made a minimum repayment of 50% of the total amount payable, then you may qualify for VT.

1.&nbsp;More expensive in the short term

When buying, you’re paying off the entire value of the car to take full ownership. This means higher monthly repayments. Alternatively, you can buy the car outright, which means paying the full amount at the offset.

Buying a car isn’t cheap, and unlike a house, for example, a car’s value will consistently depreciate with each passing month. This means if you decide to sell the car at any time, you will likely make a loss on your investment.

Buying a car, especially if it’s on finance, means you are selecting one car for the foreseeable future. Usually on a 36–60-month term, so this commitment means you won’t be switching your car until it’s paid off.

When buying a car, finance agreements often tend to be longer than leasing agreements. This means being locked into a legal agreement for a longer period.

5.&nbsp;You are responsible for keeping it legal and roadworthy

Buying a car comes with added expenses. You’re required to ensure your car is roadworthy at all times. Not doing so can result in fines or having to pay for multiple fixes. This needs to be considered especially when an MOT is required.

<a href="https://www.caruno.co.uk/car-leasing">Leasing</a>, or <a href="https://www.caruno.co.uk/car-finance/personal-contract-hire/">Personal Contract Hire</a> (PCH) a car comes with its own advantages and disadvantages.

Leasing a car is effectively “renting” on a monthly basis. Leasing doesn’t always require a deposit or initial payment, and you can get a newer car with lower monthly repayments than if you were to buy it.&nbsp;

If you’re leasing the car for business use – you can benefit for even cheaper rates as well as tax rewards.&nbsp;

2.&nbsp;Don’t worry about selling it on

When leasing a car, you don’t have to worry about depreciation as you’ll never own the vehicle, and therefore won’t have to worry about selling it in the future.&nbsp;

3.&nbsp;Change your car every few years

Leasing agreements are usually anything between 24 and 48 months, allowing you to change your car to a new make and model every few years. It’s a great way of keeping up with the latest car tech and safety, and choosing a car that matches your lifestyle every few years.

One of the major benefits to leasing a car is that you can choose a deal that includes both road tax and maintenance in your monthly payments. This means that you’ll be covered for regular servicing, faults, and repairs, and in some cases, even UK breakdown assistance.

Because you’re not paying off the full value of a car or putting down a lump sum, leasing allows you to choose from a wide variety of vehicles – even the ones you may not be able to afford outright. Which means that you have the option of selecting a higher-end, better-equipped vehicle.

Unlike buying, leasing a car means you’ll never have the option to own the car.&nbsp;

When leasing a car, you’ll have mileage limits – usually anything from 5,000 - 30,000 per year. The higher the mileage limit you choose, the higher your payments will be. If you go over the set mileage limit, you’ll have to pay excess charges.

3.&nbsp;Repairs and maintenance are required

If you lease a car, it must be returned in good condition, within the industry standard BVRAL Fair Wear and Tear guidelines. This means you are responsible for keeping the vehicle in good condition. Any damage needs to be repaired or you could find yourself paying excess charges.

When leasing a car, you’re not permitted to make any changes to the vehicle. If you do, you’re required to ensure these changes are removed before returning the car.

5.&nbsp;High charges for returning the car early

It’s possible to return a leased car before the end of your contract, but this may lead to costly early termination fees. Some companies may also charge you for the outstanding balance of your contract.

When leasing or buying a car, you’ll find several financing options available. These include:

PCH is the most common form of leasing in the UK. Through this process, you basically ‘rent’ a car for an extended period. Usually around 24 to 48 months.

PCH agreements begin with an initial deposit followed by monthly payments throughout the lease term. At caruno, we offer some £0 deposit options.&nbsp;

Road tax is often included in the monthly rates and a maintenance plan is offered for an additional fee. Insuring the car is your responsibility.

When taking out the lease, you’ll have to specify your annual mileage. The higher your anticipated mileage, the higher your monthly payments will be. If you go over your annual mileage, you’ll have to pay for the extra miles when you return the car.&nbsp;

You’ll have to pay the full lease amount if you decide to cancel the contract.

When the agreement ends, you simply return the car to the provider and walk away, provided there is no damage to the car. You won’t be given the option to buy the car.

<a href="https://www.caruno.co.uk/car-finance/personal-contract-purchase/">PCP</a> agreements are a flexible option for those who are in two minds about buying a car.&nbsp;

With a PCP, you’ll also pay a set monthly rate for a set period. These payments are used to cover the car’s depreciation over the lease agreement. Interest will also be added.&nbsp;

Like PCH, PCP comes with a mileage allowance limit. The same conditions are attached.

With a PCP, you’ll be given the option to make a balloon payment at the end of your lease, to take ownership of the car. Alternatively, you can simply return the car and be on your way.&nbsp;

You’ll also be able to part-exchange the car for another. Any equity in the vehicle can also be used as a deposit for your next car.

If you choose LP, this means you’ll have to buy the car.

With a LP, you’ll have to pay a deposit at the beginning of the agreement. This’ll be followed by a set period of agreed upon monthly repayments.

Once you have completed the monthly repayments, you’ll have to make a final balloon payment to take full ownership of the car. This usually equates to around 20% of the car’s value.

Alternatively, you can part-exchange and arrange a new lease agreement.

A <a href="https://www.caruno.co.uk/car-finance/hire-purchase/">HP</a> is the go-to option for buying a car.&nbsp;

You’ll have to make an initial down payment – at least 10% of the car’s value - followed by monthly repayments to cover the remaining value of the car. These repayments can be made over a 12 to 60-month period. Interest will be added to these monthly repayments.&nbsp;

Upon completion of the monthly repayments, you’ll have to make one final payment in the form of a processing fee called an Option to Purchase. This can be as little as £1 and varies from one lender to another.&nbsp; After this, you’ll officially own the car.

A PL allows you to immediately pay off the full value of a car.&nbsp;

Firstly, you take out a loan for the same value as the car. You’ll then be required to make set regular payments on the loan that also cover the interest. Most PL deals are secured meaning the car will stand as surety for the loan. If you fall behind on the payments, the car may be repossessed by the lending institution.

The great thing about a personal loan, besides from its flexibility, is that it allows for immediate ownership of the car. This means you can sell the car at any stage to pay off the rest of the loan, if necessary.

The monthly payments and interest for a PL however, can be higher than the other financing options.&nbsp;

Additionally, this option comes with no mileage restrictions.

Whether you are buying or leasing a car, you will more than likely be subjected to a credit check. At caruno, we conduct an initial soft credit search – with no impact to your credit score – in order to show your chances of approval and how much finance you could likely get approved on. Use our quick and easy eligibility checker to get an instant decision in minutes.

There are several factors that determine whether it is cheaper to lease or buy a car.&nbsp;

When you lease a car, your payments are covering the depreciation. This means lower monthly payments, but you’ll never own the car and will never benefit from its resale value at the end of the agreement term.&nbsp;

However, leasing also means you don’t have to worry about the hassle of selling the car on. This combined with a choice of both new and used cars to choose from means that you have the opportunity to drive a higher-end car if you wish to.&nbsp;

Buying a car outright is usually the most financially friendly way to get your hands on a car. This is because you won’t have to worry about making monthly repayments or paying for any added interest.

This, however, isn’t always a feasible option for everyone, as many people simply don’t have a huge chunk of money to make an outright purchase.

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Should I buy or lease my next car?