car finance

Car Finance vs Car Leasing: Which Is Best?

If you are thinking about getting a new car, you may be wondering which is better: car finance or leasing a car.

These are two very different options, and they both have pros and cons. Here’s a look at both so you can decide which one is the right option for you.

 

Car Finance

Car finance is essentially where you take out a loan to buy your new or used car.

You may get a loan from a specialist lender, or you may get it directly from the seller.

You will normally have to pay a deposit up front (though not always). Once you are approved, you will then get your new car so you can start driving it straight away, and you will pay for it in monthly instalments until you have paid off the total cost plus interest.

 

So what are potential problems with this?

  • You may have a bad credit record. This does not stop you getting a loan, but you will have to find a lender who is willing to lend to you.
  • You may also have no deposit. Again, you may be able to get a loan with no deposit, but it depends on the lender. And if you fail to make the payments, this can affect your credit record.
  • The car is also an asset that depreciates in value over the years, which is worth being aware of.

On the other side, there are lots of reasons why car finance can be a good choice:

  • For a start, it’s an unsecured loan so you don’t have to use your home or another asset to secure the loan.
  • It can also be very flexible because there are lots of lenders and types of loans to choose from. You could choose how long you want to pay back the loan, for example.
  • The car is also yours, and you can do what you want with it. You could even sell it, as long as you keep up with your payments.

 


Representative APR of 27.9%


Car Leasing

Think of leasing as a way to rent a car. You essentially pay a monthly fee, and you get to drive the car. But it’s not yours at the end, and you have to give it back.

There are a few cons of leasing:

  • Firstly, you never own the car because you are only hiring it, which may not be suitable for your situation.
  • There may be fees involved as well. For example, there may be mileage limits, and if you go over these, you may have to pay a penalty. There are usually fees for causing damage too.

 

But there are some benefits too:

  • One of the most important benefits is that you can change vehicles regularly. If you want to get an upgrade every few years, this is a great choice.
  • Also, you don’t have to worry about the depreciation in value of the vehicle because it is never yours.

 

Which Is Best? Car Finance or Leasing?

Everyone’s circumstances are different, so it’s impossible to say which option is the best.

If you want to keep on upgrading your vehicle every few years, leasing may well be the better option.

However, if you simply want to get your own set of wheels and you want to own your car outright, car financing is usually best in most situations.

Just remember that there are lots of lenders providing slightly different loans, and some are better than others. Some are more flexible if you have a bad credit record, for example.

So make sure you look around and choose your lender carefully when you opt for car finance.

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REPRESENTATIVE FINANCE EXAMPLE:

Borrowing £7,500 over 4 years with a representative APR of 27.9%, an annual interest rate of 27.9% (Fixed) and no deposit, the amount repayable would be £244.77 per month, and total cost of credit would be £4,248.96 and the total amount payable would be £11,748.97*

*Your rate may differ from the above illustration due to your individual circumstances. All credit subject to status.

We are a broker not a lender.

Authorised and regulated by the FCA – FRN – 727280. Carvine is a trading name of Skyemotion Ltd. Carvine only introduces finance enquiries to Skyemotion Ltd. All finance is subject to income and status. Written Quotation on request. We process your personal information in accordance with the data protection act. ICO Registration No. ZA135017.Office 25 The Old School, 188 Liscard Road, Liscard, Wirral, CH44 5TN