Do I lease a car or do I borrow to buy?

1The 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. But 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 purchase in brief

2If 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 other depreciation mark-ups. You then give the car back. So the monthly charges will be comparatively low. With a lease the car”s final value – what it is worth for re-sale at the end of the agreement – will be taken into account. You will never actually own the vehicle – the lease company will – which means that if you default on payments you will lose the car, whatever other financial penalties may be imposed.

In effect you hire the vehicle for an agreed period of time and pay a fixed sum for the privilege. The fixed sum will take into account the average mileage you are likely to do. The higher the mileage, the higher the payment. The lease can be just for the car, or can include servicing, but again at an increased cost. Terms usually range from 18 months to five years, and when the lease ends you simply return the car, settle the contract and walk away.

Understand the lease deal

3Don”t be tempted to lease a car with the eventual intention of buying it, that is a very expensive way of doing things.

Here at Albion we make sure you completely understand the lease deal and always ensure we get it right for you from the start;

[a] Low OTR price (lower capital to finance)
[b] Low lease factor (interest rate)
[c] Low administration fee (no fee where possible)
[d] High residual value (more competitive quotes)

Lease deals can be complex, and as with home mortgages, Albion Leasing has no ties to a particular finance provider or car manufacturer can give you transparent and impartial advice.