/ Money, Motoring

To buy or not to buy? Would you lease a car?

Car and pound sign held by woman

Three quarters of new cars in the UK are currently bought on finance. Would you rather buy a cheaper car outright, or splash out on a pricey car and several years’ worth of monthly payments?

Call me a cheapskate, but when I work out how much I can afford to spend on my next car, I look at my bank balance and savings and subtract a bit. If the money’s not there, I can’t afford to replace my car.

However, it looks like I’m in the minority – 74% of car buyers are using finance to put a new car on their drive.

But do you see car leasing as money wasting or just savvy spending?

The cost of leasing a car

Go to any car manufacturers’ website and you’ll see huge adverts for finance schemes on new cars. Monthly payments of just £69 are enough to secure the keys to a shiny new Skoda CitiGo. And even Rolls Royce or Aston Martin websites aren’t shy about the option of finance schemes.

Just in case you’re wondering, it’ll take payments starting from £1,888 per month for an Aston Martin Vanquish, and you’ll need to stump up a £40,000 deposit in the first place. As for purchasing the car at the end of the lease, that’ll be £91,000 please. But back to the real world…

Which? Car’s Claire Evans has shared her thoughts on wanting to own a car rather than borrow it, but my issue is whether people actually know how much leasing a car is actually going to cost them in total.

Monthly car leasing fees

It’s easy to be swayed by a sticker price of £69 per month and sign the contract without too much hesitation. But if you have to pay £69 per month, every month, for a number of years and still don’t own the car, is it really good value?

Well, in the case of the Skoda CitiGo, 0% finance means that you pay the list price of the car spread over three years – less if you choose not to buy the car outright at the end. However, a similar Seat Mii will cost an extra 8% over buying it outright thanks to added interest and several fees. And I do wonder how many people do the maths…

Another recent option is packaged leases which include insurance, road tax and servicing costs, all rolled into a monthly bill.

But what appeals to you? Would you consider leasing your next car, or would you rather buy a cheaper car outright?


I never buy anything on credit unless the interest rate is zero or lower than the expected appreciation in value of the purchased asset, e.g. a home. Given that cars depreciate rather than appreciate, it makes no financial sense to buy a car on credit. I always pay for cars with a debit card, even as much as £45k. People should buy only what they can afford and stay away from this unhealthy consumer debt culture, whether it be for cars, mobile phones (where this problem is worse) or anything else.

Your advice seems to be based on the idea that all purchases should be for financial gain. This work well with capital purchases such as a house as you stated. However when purchasing a car you will always loose money wether cash or finance. I recently purchased a car on finance to replace my old runabout from my uni days as it had become unreliable. If I were to save up to replace it it would be a year before I could afford a suitable motor. That would be a year without a job as I could then not get to work. Purchasing a car in finance is far more comparable to purchasing a service such as internet access. For a fixed amount a month I am given the use of a car which will be maintained by the dealer. This makes a lot of sense and as long as I budget carefully the arrangement works very well.

Heisenberg says:
31 August 2017

I recently bought a rare used car outright and in 18 months of ownership the value has increased by 43%, so it’s wrong to say that when purchasing a car you will always lose money. Taking all associated motoring costs into account, I could probably sell it today at an overall profit. When spending large amounts on tangible things I don’t like to throw my money away, and if possible I aim for a positive return. If you buy something relatively rare there are fewer example available each year, so supply decreases and prices go up. The flood of PCP deals has the opposite effect – the market is awash with common vehicles at 3 years of age with similar mileage. Used dealers have already observed a drop in prices.
So by paying a PCP you pay the depreciation cost to the dealer and have a less marketable asset at the end. If you choose to pay the final amount, most manufacturer’s warranties end after 3 years so you are then liable for repair costs. Having a new car is becoming less desirable as these cheap deals open the doors to the masses – I’d rather drive something distinctive.

Hello and thank you I agree strongly with your thinking. I’m just needing to accept my beautiful classic merc will not get through the MOT due to failing the emmisions legislation.

I will continue to look for a suitable replacement.

This comment was removed at the request of the user

The other thing is – if it’s borderline and you do low mileage – an oil change shortly before the MOT will give you a near VW advantage (other tricks are available…)

Howard Price says:
19 February 2020

What rare car did you buy that went up by 43%?
How typical do you think you are compared to other motorists?

Steve Callaghan says:
5 March 2021

If your Merc really is a classic, ie. an historic vehicle over 40 years old, it doesn’t need an MOT or road tax.

I would never buy a new car because of the initial depreciation. I would then hope to keep the car for a fair few years, and be prepared to spend money maintaining and repairing it. So no new car – and if I lease a car I know someone is making money out of me – like PFI, why let them? Then there are the hidden charges if you give it back not in pristine condition, or if your mileage is more than expected. So buy the car you can afford, even if it needs a loan.

Gerald says:
9 November 2013

Hi Malcolm,

What is the difference between a lease and a loan ,if you borrow money in any form you have to pay for it one way or the other, in some cases as explained by Ed people need a car to get a job, so its the old adage sometime you have to speculate to accumulate.This also applies to PFI schemes as if you didn’t know.The Accountants in both the Public sector and the private Sector are all aware of the benefits involved why do you think they all encourage these schemes?
In the real world no one gets a free ride, the choice is simple Pay or walk just look at the third world and Communist Countries where cars are still classified as a luxury.

Hello Gerald, I prefer to own an asset that I use regularly, and buy what I can afford. That may mean taking out an affordable loan if the capital is not available. With a lease presumably you need to take a new vehicle, and you don’t own it unless there is a purchase option – when I have briefly looked it seemed a more expensive option. Anyway, I would buy used.
As far as needing a car to get to your job, cars are much more reliable these days so buying a cheap used car should deal with that (our family cars range from 9 to 25 years old and work reliably).
PFI – having been on the sidelines and seen the number of people with fingers in the financial pie shows why they are such an expensive way of keeping debt off the official books. New hospital building is a classic example with huge repayment costs tied in for years. The schemes are encouraged because they have been a way to get assets that would otherwise require public debt – but what a costly way they are of cooking the books. That is my take on PFI.

I would just like to make the distinction between an asset and a liability. An asset makes you money, a liability costs you money. A car is not generally seen as an asset as it costs money to own and run, making it a liability.

In accounting terms, vehicles are a non-current asset. “Examples of noncurrent assets include…..vehicles” https://www.accountingcoach.com/blog/what-is-a-noncurrent-asset
An owned vehicle has a value, one that depreciates like other plant.

Yes, having a new car is very expensive whether you buy with cash, a loan or you lease. The main thing I’ve learnt in over 40 years of driving is that cars cost money!
If image is not important, buy a 2 or 3 year old car and keep it for a few years. Three years ago I bought a 3 year old Kia with 4 years remaining of the manufacturers warranty. I’ve not yet had any repairs, and still have a year’s warranty left and the car has a good trade in value. Makes a lot of sense to me.

Blandy says:
22 November 2013

I’m with Em on this issue. I regard a car as a necessary transport box and so far have never used hp and always paid cash, never more than £5k. For the last 10 years I’ve relied on very reliable Japanese imports from eBay. The last one (4 years ago) – an automatic diesel – cost me £1500. It has 8 seats with several configurations (great for the grandchildren) and is very comfortable to drive. To some extent the minimal capital outlay is off-set by relatively higher running costs – poor mpg returns (35 mpg on motorways – less than 30 mpg in town) but it has never broken down and costs nothing in maintenance apart from the routine services. For the record my Japanese motorcycle is equally reliable, and twice the fun.

My previous car, a diesel bought new (lots of enjoyment choosing the options on the manufacturers website), was Japanese although made in Swindon, cost me a fortune in tax and lost a larger fortune in depreciation. It was also prone to numerous very unhappy bodywork, electrical and mechanical issues. I was glad to trade it in after five years.

My latest car is Czech, bought as an ex-demonstrator with just a few hundred miles in the clock, saving several thousand pounds, and in the two years I have enjoyed driving her, has had no issues. The government were deprived of new car taxation and depreciation so far is negligible.
She is also much more economical – diesel and does 55mpg at 70mph.

Buying brand new is delightful if you can afford to waste loads of money in taxation and depreciation, but stupid.

I love to know about the Auto services. It’s really interesting.Thanks for sharing this wonderful Post and please continue to share this type of post

Aaron Speight says:
6 December 2013

I have been a new and used car salesman for the last 6/7 years now which comes with a company car so no worries there. My wife and I have recently bought a new A1 for her to replace her Mini One, unfortunately I don’t work for Audi to get an employee deal. They are still fairly new and so the used prices are quite strong, we ended up going for a new car on PCP as there was 1000 deposit from audi plus free servicing, and we managed to negotiate a discount of 1000 off the car, it worked out better than buying used and with new you can pick the options/colour etc. Dealerships are paid more to sell pcp so we would not have had 1000 off if we were paying cash.

A lot depends on what you want a car for, if it is literally a task to spend as little as possibly to get from a to b then that will determine what you will buy. For my wife and I it has a lot more to do with style, identity, convenience and running costs.

Many people like to look at a nearly new/used car and see a huge saving against the manufacturer list price and think ‘wow I’m saving all this money and paying no tax to the government etc.’ – firstly a lot of manufacturers have a list price and then set discounts of £1000’s on the car straight away to make it look like a great deal (DFS do this with sofas), and this is the true new car price. Also if a car has £1000’s off it on top of that it shows that the car is not a great model and the dealer is having to make the price attractive as the car is not.

L Nash says:
9 February 2017

A messy separation left me with a very bad credit score, I needed a car but did not have enough to purchase outright, secondhand made me nervous as I know nothing about cars. I have to commute to work driving 2 hours a day and so need something reliable. I had never considered leasing previously as I always assumed it was for businesses, but when I started looking into leasing found myself being turned away – because of my credit score. Very frustrating as I am in full time employment and can afford repayments. I finally found Compass Vehicle Services Limited, who not only were extremely helpful but also got me into an Hyundai i30 (I would not have chosen this if I were on my own!) Their reason for the i30 was reliability, within my budget and 5 year manufacturer warranty – so ticked all the box’s. I am taking steps to get my credit score back up and Compass have said they will write me a credit reference when my lease is up to help me get back into mainstream. Would I buy a car again? no, I am happy driving in the knowledge that I have a new car which I can change in 3 years time. For someone like me who does not know anything about mechanics, I feel safer in a leased car.

Izzy says:
24 January 2018

Ahhh this is actually so incredibly useful! Honestly Im just terrible with knowing what to do with this kind of thing – cars get me confused enough as it is – top that off with finance and money and Im just completely at a loss – so this is genuinely really helpful! In terms of finance (I know this is probably a daft question) but is there a particular brand of car that gets you a better deal? For example are Peugeots going to get me a better finance deal than a Kia? Or is it totally down to the company you get the finance from? If so what are good companies I can go through to get the best deal? Is that admiral one a good one? Honestly I have absolutely no clue so any advice or recommendations or anything would be much appreciated – single ‘no car mad boyfriend’ needs to really start to learn more about this kind of thing hahaha.

[Sorry, your comment has been edited to align with our community guidelines https://conversation.which.co.uk/commenting-guidelines/. Thanks, mods.]

We bought a new top spec Skoda Roomster 11 years ago. Finished paying off the car loan after 5 years. Its never let me down and is still going strong. But its a diesel.. any thoughts on next car would be welcome.

It is difficult to know what to do for the best. Diesel cars have become the favourite target for criticism but that could change as a result of better emission control.

My suggestion would be to hold onto your present car, which will more or less have stopped depreciating by now. At the weekend I was ferried around in a friend’s car that has needed no expensive repairs since he bought it new. I noticed that this little Polo had covered 186k miles and it was not even a diesel one.

If you do change your car it’s worth checking the current VED rates.

Happyfeet, worth looking at Which? car reviews, but you’ll have to be a member to get full information. Or try Honest John https://www.honestjohn.co.uk/carbycar/. Modern diesels are much better at emissions but if you normally do a lot of short journeys then I’d go for petrol. Or if you live in a town and your journeys are short then perhaps electric, or electric with a range extender if you do longer trips regularly.

Anyone who needs an electric car to do longer journeys needs a proper hybrid electric vehicle. As far as I know, a ‘range extender’ just helps charge the battery and does not propel the car.

Diesel cars should be avoided if doing a lot of town driving because the diesel particulate filter can become blocked. Some longer journeys are needed so that it can reach the temperature needed to burn accumulated soot.

John collins says:
11 December 2018

Is it lease or buy

Vivien says:
18 March 2019

I need to replace my car. I do under 5000 miles per year. I want a small reliable car for local journeys iand not fussy about it being new or the style etc. I can afford to pay cash up to £6000 (but don’t want to spend that much if I can help it). Should I buy a second hand car or lease? I’m a retired single lady who knows nothing about cars and fear I could be ripped off at a dealership. My daughter swears by leasing but my gut feeling is that it’s not right for me. Lease or buy? Anyone recommend a suitable car make/model.

Hi Vivien, I don’t use it myself, but I know leasing is a popular option for those who want to enjoy the benefits of a new or nearly new car and who expect to change their cars every two or three years anyway.

My personal preference is also to spend up to around £6000 or so and then own a car outright for several years.

These days most cars are very reliable. If you read Which? (or other magazines) you can see which ones they tend to recommend. In general, I think you won’t do too badly for reliability if you restrict yourself to small cars from the likes of Honda, Toyota, Hyundai, Suzuki, Nissan, Skoda, Ford and so on.

That said, if you don’t want to get ripped off at a dealership, it can really help to start out by finding a reputable local dealership who won’t do that and then buy something from them. In particular, if they are nice and local to you, they’ll probably be hoping that you’ll go back to them for servicing, so they won’t want to upset you right after your initial purchase.

Vivien – I suggest you take along a friend when you are looking at cars, ideally someone who does their own maintenance. Look for cars with a full service history and no more than one or two owners. I’d agree with Derek about brands to look for and suggest avoiding models that are expensive to buy new because the maintenance and repair cost can be high. I suggest avoiding cars that have done more that 15,000 miles a year, even if they have been regularly maintained because parts wear out.

I would suggest buying rather than leasing, assuming you intend to keep the car for a few years. Breakdown insurance is likely to be cheaper if added to your house insurance and this avoids being charged more next year.

If you have no idea of what you can get for your money, it would be worth spending time studying what is available and maybe buying a guide from a newsagent.

Buying privately is cheapest but best left to those who know about cars. Buying through a dealer will provide a warranty, but certain items such as the clutch are likely to be excluded. At least one of the major companies has a rotten reputation.

Sorry if I sound a bit depressing but most people I know have been very happy with their cars and buying secondhand can save thousands of pounds.

Personally I’d pay the extra, buy from a main dealer with a decent warranty and as new as possible, join the AA and find a reputable local garage to service it for you. The Which? car guide should help make a choice. Leasing is not something I’ve done, but do prefer to own what I use and not worry about minor damage, excess miles, that might affect the value when the lease ends. Pay as much as you can afford, look after it and keep it for as many years as you can to get best value.

I must of seen dozens of articles on buying vs leasing cars and everyone says buying is cheaper and never really details the maths.

If I buy a nearly new medium sized family car for say 15000 cash you are going to loose money every month. That’s a fact. Rate of depreciation can vary but odds are it would be 200-300 a month. Miles and time kill the value every month whether you like or not. Now a sensible person should be putting the same 200 a month on the side into a investment vehicle every month. Why? In X years the car will be fully depreciated and will become unviable to repair. Then suddenly your expected to stump another 15k to replace the one that’s died. If you have not saved then it can be a real finding the money.

So in short you got the car loosing money every month, your saving money on the side every month, and let’s not forget repair costs over the years. You could end up paying 400 a month. That’s 200 a month in depreciation and 200 a month saving. You got it going out of both hands. It never ends while you own a car.

If you take a SENSIBLE pch lease it’s just one outgoing cost from your bank account on a brand new warrentied car. You can easily get a medium sized family car for an average of 300 a month all in.

If your going loose money might as well get the most out of it.

Rafal says:
6 June 2021

That is exactly what I am thinking. I am looking at 5 year old cars that cost £18,000 to buy and roughly £36,000 to buy when new. It means those cars lost 50% value in 5 years, and in monetary terms it translates to £300 a month. So when I read now that people prefer to own the car outright because it is ‘cheaper’, it is not really. And in the next 5 years the car will lose another 50% chunk of it current value. In all honesty the leasing option does seem sensible after all.

Electric cars are only there to get rid of urban pollution. If all short distance drives would be done in electric vehicles that would mean an enormous clean up of urban air. Most cars on the road are driven over short distances with cold engines. Petrol or diesel, both are very harmful under these conditions. If it comes to better use of road space then bicycles and scooters are the means to turn to as these do reduce the need for urban parking space.

No one has actually mentioned comparable cost of motoring – cost of car, maintenance costs, tax, change of tyres, breakdowns and servicing, to much few, over 3-5 years of ownership. Some lease companies – e.g NHS and other public sectors, add the cost of motoring to monthly payments and you only pay for fuel. How do these costs compare with ownership and you having to pay for the extras?