Car hire is getting increasingly popular. Car purchase has been the established way to access a vehicle for decades, but now a new wave of drivers is shunning it in favour of car hire. And they have some good reasoning. Here, we’re going to delve a bit deeper into this growing trend and look at the advantages and drawbacks of hiring versus buying a car.
This is a collaborative post.
A Look at Car Leasing
In the simplest sense, leasing a car is similar to renting a property; you pay a monthly fee to use the vehicle but do not own it. Once the lease period is over, the car goes back to the leasing company. It’s the same pattern as rental agreements, but the timeframe usually stretches over a few years rather than just a few days or weeks. In other ways, however, car leasing offers drivers more advantages than purchasing does, much as leasing a house offers tenants more advantages than buying one does. For example, a house doesn’t typically depreciate automatically when you buy it, whereas even the nicest car will lose a lot of value the second you drive it off the forecourt.
Then there’s the potential for driving newer, safer, or flashier models. With a car lease, you typically have the ability to switch to a newer or different model every few years when your contract is up. Plus, the cost of leasing a new or more luxurious car is considerably less than purchasing that model would be. This is ideal if you like keeping up with the latest cars and technology features available, or simply want to keep your family safe with the latest protective features. Additionally, you typically pay less per month when leasing compared to buying a car through financing. Monthly lease payments only cover the car’s depreciation, plus any interest charges and fees – not the whole value of the car.
Nevertheless, there is a flipside to car leasing. Usually, you have to stick within a set annual mileage limit, and exceeding this can incur hefty penalties. Also, you are expected to return the car in good condition, so any damage can result in charges. Further, leasing can be more expensive than purchasing in the long run if you continue to lease new cars back-to-back.
Understanding Car Purchase
Buying a car is a familiar option for most. You either pay for the whole car upfront or opt for finance to spread the cost into monthly payments. There are various types of car finance available, including hire purchase, personal contract purchase and personal loans.
Opting to purchase a vehicle means you’re not limited by annual mileage restrictions, and normal wear and tear won’t result in additional costs. More importantly, the car will be yours at the end of the agreement, making it an asset.
However, the car’s depreciation is a turning point. As mentioned, as soon as you drive a new car off the forecourt, it starts to lose value. Plus, depending on the type of finance agreement you opt for, the monthly payments could be substantial compared to leasing. It’s also expensive if you like to drive new cars, as selling your old model and buying a fresh one involves high costs.
The Bottom Line
To lease or to buy boils down to personal preferences and lifestyle. If you like regular changes, enjoy the latest tech features, want to save some money, and aren’t keen on ownership, leasing might be the way to go. It means lower monthly payments and freedom from the hassle of selling the car later on. However, you must be conscious of the mileage limit and be prepared to take care of the vehicle.
On the other hand, if you want to really own a car and have the freedom to modify it, or plan on keeping it for over three years, buying would be the smarter choice. Buying is also a good option for those who drive a lot and for those who want to see a return on their investment.
Whatever route you choose, it’s essential to thoroughly understand the ins and outs of each option, the financial implications and your driving behaviour. The decision to lease or buy a car is a major one and warrants serious thought and research. It’s always in your best interest to explore all options before making your dive.