Make your Choice - Lease or Buy

Which is Best – Lease or Buy?
This answer usually involves the necessity to do some financial analysis and comparisons of the two options.

Some of the things that need to be considered are:

  • A short term monthly cost of leasing which is always less than the cost of buying

  • The medium term cost of leasing which is the same as the cost of buying

  • The overall cost of leasing compared to buying over the same term. This is approximately the same as assuming the buyer sells the vehicle at the end of the loan term.

  • The long term cost of leasing which is always more than the cost of buying, assuming the buyer keeps the vehicle.

  • If the buyer keeps the vehicle after a 2 year leasing loan has been paid off and drives it for many more years then the cost is spread over a longer term, therefore the cost of buying one vehicle and driving it for 10 years is less expensive than leasing or buying five different vehicles each for ten years over the same period.

If the long term financial benefit for you is what you seek in acquiring a new vehicle then buying and keeping it is probably the best option. If you want lower payments, you like driving a new car under warranty but you are willing to pay a little bit more to gain those benefits then you should lease.

If you want to be able to pay off your vehicle and be debt free for a while, drive it for as long as you want, are willing to have higher initial monthly payments and lower long term costs then you should buy. To summarise, it really depends on what is important to you.

Which Is the Best – Lease or Loan Financing?
Leases and loans are simply two different types of financing. One finances the use of vehicle and the other finances the purchase of a vehicle. It is hard to say which is better than the other because it depends on each case.

When doing a comparison it will also come down to the priorities that a person has. For example, is it better to have long term cost savings and lower monthly payments? Or is it better to have no deposits or down payment and yet have lower up front costs with a longer term.

How Does Leasing Differ From Hire Purchase?
In hire purchase you are buying a car which is in your name but borrow money for it from a finance company. You can only claim depreciation against your business income and the only other charges you can claim off tax is the interest and other costs on the loan. With leasing you are able to claim the full amount of the payment that you make because essentially it is a rental only type situation. With hire purchase you are the owner of the vehicle and it is in your name.

 With leasing, you are leasing the vehicle and ownership is not yours until the end when you arrange payment for it.