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BLOG: Should you lease or buy a car?

Written by: John Wilmot
Car leasing, also known as Personal Contract Hire (PCH), is growing at an exceptional rate in the UK, and it shouldn’t come as a great surprise.

The demand for leasing is being driven by the consumer, and the consumer of today is embracing a Netflix and Spotify way of life, with access and usership being the new ownership, all for a fixed monthly cost.

From ownership to usership

Leasing a car is the same concept as leasing or renting a property. You will usually pay a deposit or upfront fee and then pay monthly payments for an agreed amount of money for an agreed amount of time.

Similar to renting a flat, where the landlord owns it, but you live in it and when the contract ends you move out – leasing a car is the same.

You don’t own the car or buy it at the end of the contract, you simply give the car back. Just as a property is inspected when you move out, the car will be inspected when you give it back to see if there is any excessive damage.

What’s included?

Road tax will be included in your lease deal and your new car will be delivered to your front door completely free of charge.

Insurance, breakdown cover, maintenance and servicing, aren’t generally offered as standard, but it’s worth checking with your provider as it does vary between leasing companies.

Less is more

With contract terms, size matters.

Typically, a four-year contract will give you the cheapest monthly rentals, but it’s not uncommon to see two-year deals at the same monthly price so it’s worth doing your research and hunting these deals out.

There’s mileage in every deal

All lease deals have a pre-agreed mileage, with the cost being built into the contract. For instance, 15,000 miles a year is going to have a higher monthly rental than 10,000 miles.

With Covid, many people have and are using their cars less. It’s worth considering buying less mileage and paying an excess mileage charge at the end of the contract. This can typically range from £60 to £100 per 1,000 miles over for an average executive car.

It’s also worth noting that you can renegotiate your mileage mid-term at a rate per mile lower than any end of contract charges. So, when circumstances change in the current uncertain climate, there’s flexibility either way.

Chase the deal, not the car

Lease prices are hugely volatile. You have your eyes on an Audi A4, and although that A4 you want has been £300 per month, it’s now sitting at £450 per month.

Market factors are getting in the way, making your target car poor value to lease. However, a BMW 3 series with a similar list price could have been £400 per month yesterday to lease and is now £300 per month.

In leasing, it’s not uncommon for £40,000 list price cars to be as little as £300 per month with no deposit, when the equivalent PCP deal could be more than double that.

So that Audi A4 you were set on suddenly makes no sense, but you’ll have a Cheshire Cat sized smile on your face after snapping up the BMW knowing how much you’ve just saved over the PCP deal.

What happens at the end of the lease period?

Once your lease contract comes to an end, you hand back the car to the leasing company, who will usually collect it for free. It will check the paperwork, inspect the car for any damage, beyond fair wear and tear, and check the car is within its mileage limit.

If you plan ahead and are taking another deal, your new car could be delivered at the same time as the other is being collected – avoiding any long waits in between.

Track the market

Car lease comparison sites such as LeaseLoco keep track of deals and even have historical pricing, just like tracking stock market graphs, that really will bring out your inner geek.

It’s worth tracking the market six months ahead of when you expect to change your car, so you get a feel for pricing in the market.

You’ll spot the volatility, and maybe even a pattern in pricing. If you don’t see any patterns, keep track of your desired car and when the price drops, you’ll be notified.

John Wilmot is CEO and founder of car leasing comparison site LeaseLoco

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