The pros and cons of leasing a car

Leasing a car can offer flexibility and lower monthly payments, but it’s not without its drawbacks. This guide looks at the advantages and disadvantages of leasing a car so you can decide if it’s the right choice for you.

Did you know you can lease a car right here on Carwow? We’re here to help you through every step of your car-changing journey.

Advantages of leasing a car

Leasing could be the perfect way for you to drive home in a new car. Here are four benefits of leasing your next car:

1. Leasing lets you drive a new car for typically lower monthly costs, without worrying about depreciation. Most leases last two to four years, with no option to buy.
2. At the end of your lease, you can simply return the car with no extra fees (so long as you’ve met the terms and conditions) or start a new lease. This gives you more flexibility and there’s no hassle of selling.
3. With Personal Contract Hire (PCH) deals on new cars, your car stays covered by the manufacturer’s warranty for the full contract, so costly repairs are unlikely. If there are any issues, the manufacturer will handle them.
4. Many contracts include GAP insurance to cover outstanding finance if your car is stolen or written off.

Disadvantages of leasing a car

There are some situations where leasing a car may not be for you. Here are three disadvantages:

1. Leasing a car is like renting a house – you never own it. That’s why the monthly payments are lower, but you don’t get anything back at the end. With some finance deals, once you’ve paid off the car, it’s yours to drive without extra costs. But with a lease, you’ll always be making payments.
2. Before you return a leased car, make sure any damage is fixed. Mechanical issues are usually covered by the warranty, but the lease company expects the car to be in good shape, or you’ll get charged.
3. Ending a lease early or transferring it to someone else can be costly. Lease agreements often charge substantial fees for early returns or transfers, so it’s worth checking the terms before signing.

Is leasing a car a good idea?

Leasing could be a great way to drive a new car and avoid the hassle of selling it when you don’t want it anymore. However, it’s not for everyone, so you’ll need to weigh up whether it’s for you and if you like the look of it.

A lease deal could be for you if:

• You’d like to change your car for a new one every 2-3 years.
• You don’t want to have to worry about deprecation.
• You want a lower monthly payment that you’d get with other types of finance.
• You want maintenance costs kept to a minimum.

A lease deal may not be for you if:

• You want to own your car.
• You don’t want to worry about a mileage limit.
• You’d like to keep your car for a long time.
• You’re planning on modifying the car.

Pros and cons of leasing a car FAQs

Is it financially smart to lease a car?

Leasing isn’t usually the best choice if your goal is long-term savings or building equity, since you don’t own the car at the end of the lease. But it can be a practical option if you want lower monthly payments, a new car every few years, and predictable maintenance costs.

What is the major advantage of leasing?

The biggest advantage of leasing a car is lower monthly payments compared with buying. You get to drive a new or nearly new car with the latest features, often under warranty, without the large upfront cost of buying.

Who would benefit most from leasing a car?

Leasing is great for people who like a new car every few years, want predictable monthly payments, and don’t want the hassle of selling. Businesses benefit too, keeping fleets fresh, enjoying VAT perks, and often getting maintenance included.

What’s the catch when you lease a car?

The main catch to leasing is that you never actually own the car. Think of it more like a long-term rental than an investment.

Costs of leasing vs PCP over three years

Let’s say a car is valued at £25,000. When deciding how to finance it, it helps to understand the difference between leasing and PCP (Personal Contract Purchase). With leasing, you typically pay lower monthly instalments because you’re only covering the car’s depreciation rather than its full value. Many leases also include extras such as road tax, which can save you money. At the end of the lease, you simply return the car.

PCP works a bit differently. You pay a deposit upfront, which reduces the amount you need to borrow and lowers both your monthly payments and interest. At the end of the contract, you can either return the car or pay a large balloon payment to keep it. Choosing to buy significantly increases the total cost, while returning the car keeps costs lower – closer to leasing – but without extras like road tax.

Here’s how the numbers could look over a three-year term:

Feature	Leasing (PCH)	PCP (keep the car)
Vehicle value	£25,000	£25,000
Monthly payments	~£320/month	~£320/month
Upfront cost	£2,880 (3 months’ payment upfront)	£2,880 (Deposit or initial payment)
Balloon payment	N/A	~£12,180
Road tax	Usually included	Not included
Total cost over three years	£14,400	£26,000+

Please note that the table above is an estimate and prices may vary.

Here are some key takeaways…

• Leasing: Lower monthly payments + included extras → ~£5,500 cheaper over three years.
• PCP: Monthly payments may match leasing, but the optional balloon if buying adds significantly to total cost. The upfront deposit reduces monthly payments and interest but does not fully offset the balloon.

While PCP may cost you more upfront, remember that you have the option to own the car at the end. This means you can pay off the final amount and keep it, or sell it to get money back towards your next car. With leasing, on the other hand, you just keep paying monthly and never own the car.

Car change? Carwow!

Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.

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