Buying used or hiring: which works out better?
By Amanda | 28-03-2018
If you're considering purchasing a used car, it's worth considering all of your options to make sure you get the best value for money you can.
Leasing a car can sometimes work out to be an easier alternative, and it doesn't always have to be an expensive option. Whether it's more beneficial to buy or lease a vehicle may depend on your individual circumstances.
Below we take a look at the pros and cons between buying a used car or hiring a car, to help you make that all-important decision.
What is leasing?
Leasing is the term used for obtaining a vehicle for a fixed period of time at an agreed amount of money for the lease. You won't own the car outright, you'll have to hand it back at the end of the term, but it could be a cheaper option depending on your circumstances.
Is leasing a car cheaper?
No, generally leasing a car is often not the cheapest option, and it may be far cheaper to consider purchasing your next used car with finance instead. After all, when you buy a car its yours to drive for as long as you wish, and when you come to sell it on, you'll make some money back which will be a percentage of the original payment. At the end of a lease term, when you hand the car back you'll be left with nothing.
Factors to consider when leasing or buying a vehicle:
- Make & Model - The type of car you are thinking of getting will determine whether it's a worthwhile option to lease it as opposed to buying it. Some brands of car such as Volkswagen and BMW, retain their value a lot better than others.
- Mileage - The way you intend to drive the car is also a contributing factor. For example, the amount of mileage you will use on a yearly basis will either increase or decrease the lease payment. In addition, most leasing companies will have restrictions on the number of miles you can do to protect their investment, and you'll be charged for exceeding this limit.
- Depreciation - if the gap between the price of your new vehicle and its value after three years is more than it would cost to hire a car during that time, then you've potentially lost out and hiring the car could be the better option.
- Car Insurance - most insurers are happy to provide cover for a leased vehicle, but the leasing agency is likely to request you buy fully comprehensive cover rather than just third party, to ensure their asset is protected, which will increase your overall running costs.
Do your sums
A Which? survey recently reported that while a VW Scirocco was worth 63% of its original price after three years, a new Ford Mondeo was only worth 36% of its initial value, meaning people would be better off buying the VW Scirocco on finance, but leasing a Mondeo. As a general rule of thumb, if a car has a good resale value, you're better off buying it than leasing it.
Points to remember:
- Look at the price of the new or used car and its predicted resale value after three years.
- If you're driving an unusually high or low number of miles, factor this into your calculations.
- Don't forget to factor in the deposit you pay as well as the monthly cost.
- Consider how long you want to keep your next car. If you are in no rush to change it, you're probably better off buying it.
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