Do I Lease a Car or do I Borrow to Buy?

The simple answer is that it depends on your circumstances. You may want the best value in the long term; or you want a car for the smallest monthly payments you can afford; or you want to change your car at regular intervals.

With leasing you can change your car regularly – typically every three years – and avoid the costs that come with driving an older vehicle. However, you will never own the car and you will always make monthly payments while your agreement is in place.

In the short term, leasing is cheaper than buying with a loan, in the medium term the two methods are about the same, and in the long term it is cheaper to buy.

Lease in brief: If a car is worth £20,000 when new, and worth £13,000 when two years old, you will pay the £7,000 difference – plus interest charges and depreciation. You then give the car back. So the monthly charges will be comparatively low.

Loan purchase in brief: If a car is worth £20,000, then that is what you pay, plus interest rates. So you will pay a far higher sum, but keep the car.