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To buy, or not to buy but to lease instead? That is the question facing anyone looking to get behind the wheel of a new car – but the answer isn’t always straightforward.
While it might seem more desirable to own a car outright rather than leasing it, given that cars depreciate in value so quickly, leasing has several advantages.
Many people compare leasing a car to renting a home, but there’s one big difference. Whereas those renting a property have to endure the agony of knowing their home is likely to be increasing in value over time without them seeing any benefit, someone leasing a car has the peace of mind that, as the value of the car plummets over time – as it invariably will - they won’t have to shoulder these losses.
A leasing deal means they can simply hand it back to the dealer when they want to. But how exactly does leasing work?
As with most forms of lease, with you pay a monthly charge for a set period of time, with some car leases including an option to buy the car when the contract ends.
You can choose the make and model of the car you want to lease, but the more expensive the motor you pick - and the more quickly it is likely to depreciate in value - the higher the monthly cost will be.
As you don’t own the car, you simply hand it back at the end of the agreed term, and are free to lease another model.
Of course, this approach to having a car at your disposal does have downsides, as you will never actually own the car, despite having made payments for months on end. There may also be additional charges involved in leasing which could catch you out.
For example, contracts usually place a cap on your mileage, and if you exceed it there may be extra fees to pay.
As a result, make sure you have a clear idea of how many miles you are realistically going to cover each year, so that you can be certain you will stay within the limit.
You may also have to pay additional charges for maintenance costs, so read the small print carefully and make sure you understand exactly what these costs do and don’t cover as you don’t want to be paying for things which might already be covered under the car’s warranty.
You will also usually have to put down a deposit equivalent to two or three months’ worth of payments, and you could lose this if you want to get out of your contract early.
Remember too that you will need to take out fully comprehensive insurance if you opt to lease your car.
Third party cover only isn’t an option as this will only cover the cost of any damage done to other vehicles, and if you hand back a damaged vehicle to the company you have leased it from, you will also be responsible for the cost of any repairs and could face other charges for not returning it in the condition in which it was originally leased to you.
All that said, leasing gives you the freedom of knowing you can hand back the car at the end of the term, and you won’t be stuck with an old banger that you can’t sell.
However, you will never actually own the car – unless you opt to buy it at the end of the contract term – so you will always be left making monthly payments to stay on the road. As ever, you pays your money (one way or another), and you takes your choice.