It is estimated that five million vehicles are leased in the UK, of which approximately 1.9 million are private leases, with PCP being the most popular method of buying new cars. However, leasing – which is essentially a long-term rental – has gained popularity in recent years. I found some amazing BMW personal lease deals all because I was well equipped with the advantages of leasing a car. Since then, I have been at peace of my mind. I would like to share the basic info with you, too, in this article,
Are you considering leasing? This article will assist you in making a conclusion.
The Leasing Process: What is It?
A lease is a long-term rental agreement. You can lease rent a car via personal contract hire (PCH), which involves paying a deposit followed by monthly rental fees. In most cases, this will last between two and four years, with a larger deposit resulting in lower monthly payments.
You will hand the car back to the company at the end of the lease tenure. Some offer to buy the core, and some do not. During the lease, the company is the owner of the car, not you.
Understanding the difference between buying and leasing is as simple as a piece of cake. When you buy a vehicle, you pay the full payment of the car and possess full ownership of the vehicle.
In leasing a car, you have to pay a limited amount per month, depending upon the financial deal between you and the company. Once the contract is over, you have to give the vehicle back to the company.
Vehicle leasing means the car is not yours technically, but it is yours for a limit of time, say 2 3 years. And you will pay the rent for it.
What Are the Other Ways to Buy a Car?
If you want to buy a car, you have the below options for buying:
Cash outright
One way is to pay full payment at once by using your saving or borrowing or however you can. No need for monthly payments. You own the car. But one of the most significant things to retain in mind is you will bear depreciation and other expenses of the car engine failures and then repairing it.
Loan
Banks and companies are giving loans for cars. They will buy a car for you, and you will pay back the company in instalments.
Hire Purchase (HP)
An HP agreement seems like you rent a car over for some time with your monthly repayments paying off the car, which you will own outright when the deal is over. HP agreements are less popular because they are less flexible, and monthly payments are high.
Purchase (PCP)
In PCP, you will deposit some money in advance and set a monthly instalment for the rest of the deal time, which is normally 2-4 years. And finally, a big payment at the end. The advance and the monthly payments are actually paying off the depreciation, with the last balloon payment being the car’s GMFV.
You will have 3 options at the end of the deal:
1) Hand the car back without making the final payment, owing, and you will own nothing
2) paying the balloon and owning the car outright
3) using any ‘equity’ accrued during the course of the deal to go towards the deposit on a new car
Now you know the ways of buying a car and how leasing works. Let’s have a look what are differences and advantages or disadvantages of both:
In leasing, the ownership is owned by the company. When you buy, you have full ownership.
In leasing, the depreciation is not your headache. You just drive your car for the agreed time and return the car and move to the next latest model of car. But if you buy it, then the real depreciation is your burden.
In leasing, companies offer the full or some share of the maintenance expense. But in owning a car, the full expense is yours.
In leasing, you can easily switch to the latest model, but buying and selling are difficult for you.
So these are the main points of buying and selling that you should consider while you are buying or leasing a car.
