9 differences between leasing and buying a vehicle
Choosing the right car or van can be a challenging and confusing decision, with buyers spending three months on average researching their new vehicle before choosing the best model for them. But what about the best vehicle finance option? Is buying or leasing more suited to your requirements?
To help you understand the key difference between these vehicle finance options, Car & Van Finance Direct have put together this handy guide highlighting the key differences between leasing and purchasing!
Here are 9 differences between leasing and buying a vehicle
If you are the owner of a business, you can get positive tax benefits through using business contract hire for your new van or car. Vehicle leasing is particularly popular with VAT registered companies as some of the VAT can be claimed back on the new vehicle.
2. Wear and tear
Even though you do not technically own the vehicle when it comes to leasing, wear and tear is still your responsibility. Each finance provider has their own guidelines for what constitutes fair wear and tear, you need to check these and ensure you comply with these on return of the vehicle to avoid high end-of-lease charges.
3. Vehicle modifications
When you lease a van or car you never own it during the contract, which is why you are only allowed a limited number of reversible modifications. Any additions or removals from your vehicle are at your own risk and may invalidate the warranty.
4. Maintenance and servicing
When you own a vehicle, all of the responsibilities fall on yourself, anything outside the manufacturer’s warranty is paid by the customer, however for vehicle leasing agreements, you have the option to opt for a maintained agreement where tyres, servicing, brakes and warranty repairs are all covered.
5. Mileage fees
When you lease a vehicle you will agree on an annual mileage allowance based on your predicted usage over the year, this figure will have an impact on how much you pay monthly for your vehicle. Keeping within your mileage will mean no additional costs at the end of the term, however if this is exceeded, then you will be required to pay an excess mileage fee which is calculated per mile. Owning your vehicle will eliminate the worry of excess mileage costs, however the relationship between high mileage and lower vehicle value is a negative for both lease and purchase options.
Owning a vehicle is seen as a large investment with very little return when it does come to end of life, the automotive industry is incredibly competitive and constant advancements in technology and design does inevitably lead to depreciation of older vehicles. On average, new cars lose in excess of half of their value in their first three years. You needn’t worry about depreciation if you lease as it is up to the finance provider to sell the vehicle at the end of the contract.
7. Vehicle ownership
In the case of contract hire and leasing you technically never own the vehicle, you pay a monthly fee to your contract provider and return the vehicle at the end of the contract. Some will look at this as an advantage, others as a disadvantage.
To take out a leasing contract you will need to pass a credit check and be approved by the finance provider, so a good credit history is essential when looking to take out a lease agreement. This means drivers with poor credit or those with little or no credit history may wish to consider purchasing a vehicle outright.
9. Upfront cost
The initial rental required for leasing is usually far lower than the deposit for a brand new vehicle and is definitely cheaper than saving up to purchase the vehicle outright. This makes leasing a more viable option for those who have less funds readily available for a deposit. The ongoing lease cost tends to be lower than a purchase cost and it is fixed each month so you’re fully aware what you’ll be paying.
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Car & Van Finance Direct are specialists at finding the best vehicle and finance package for your requirements, with a massive range of vehicles available and cheap finance options available for both cars and vans. Interested? Simply fill in a contact form or call us on 02920 789234 for a friendly chat regarding all of your requirements.