Should I lease a new or used vehicle?

It’s possible that you’re thinking about getting a new vehicle for a variety of reasons. Perhaps your route to work is no longer possible using transport, maybe you’ve come to the end of your existing lease, or your current vehicle is no longer roadworthy. Whatever the reason may be, you’ve started to look at new vehicles and there are so many options available that it can feel a bit overwhelming.

There are several options to choose from when it comes to getting a new vehicle. You can lease, finance or pay with cash.

Over the last few years, leasing a vehicle has become a very popular option, especially for people that like a new car every few years.

Of course, just as there are people who believe that leasing a new vehicle is 100% the best option, there are also those who feel it’s a bad idea and an option they would prefer to avoid.

When it comes to leasing (and any of the other options available to you through OSV) we like to be completely transparent. We like to ensure that you are aware of all the positives and negatives of your options before you make your final decision.

In this article, we’re going to be looking at the advantages and disadvantages of leasing and everything that you should consider when you’re thinking about leasing a new or used vehicle.

Why should I lease a car?

Leasing is an incredibly popular option for many, however, as with anything, there are pros and cons to leasing a vehicle. One of the biggest advantages is that it will cost you less than purchasing a car outright and depreciation isn’t something you need to be concerned with, this has been factored into the monthly payments and you won’t be the one responsible for selling the vehicle at the end of the agreement.

What are the pros of leasing a car?

If you’re thinking about leasing a new vehicle or purchasing something used then there are some things that you should consider before making your final decision.

Maintenance

According to research carried out by MyJar in 2018, maintenance was one of the biggest expenses for a motorist. According to the study, the average British driver will spend nearly £28,000 over the course of their lifetime on maintenance for their vehicles. As a comparison, it’s estimated that the cost of fuel is almost £54,500 for the same period.

If that’s not enough to make you start thinking about looking at a lease, it’s worth remembering that all new vehicles come with a Manufacturer’s warranty that, in most cases, will last you the duration of your lease.

Vehicle Excise Duty and Breakdown Assistance are also often included in your monthly lease price, reducing the number of things you need to think about.

You also get the option with the majority of lease agreements to get a maintenance package which will cover servicing and, in some cases, the replacement of tyres.

A better car for a lower outlay

Everyone likes a really good deal. How many times have you heard someone say “I want that and I want to pay more for it?” Our guess is, never!

When it comes to leasing, it works out really well if you’re looking for a premium car in the UK, such as an Audi or a Mercedes as lease payments tend to be lower than if you bought the vehicle outright. This means that you can drive around in that Mercedes-AMG you’ve been admiring without your bank balance being hit too hard.

A new car every few years

This is probably the one thing on the list of positives that makes leasing a very popular choice for drivers. Just like a phone contract, you can upgrade your car every few years. This means that you can get one with the latest safety features, technology and design, all without having to consider how you’ll dispose of the one you’re driving.

What are the cons of leasing a car?

As we’ve mentioned previously, at OSV we are 100% transparent, and if we didn’t mention the cons of leasing a vehicle then we wouldn’t be providing you with enough information to make a fair judgement on whether this is an arrangement that meets your needs.

It’s not your car

For some people, the ownership of their car is important, and this is enough to put them off. However, for many, the knowledge that much of the responsibility of ownership (such as concerns about depreciation and selling the vehicle) is enough to make it a good option for them.

Mileage is limited

When you initially set up your agreement you are limited to a set mileage. However, this is something you can discuss with a vehicle specialist when you call to talk about your specific needs.

It’s important to remember that mileage affects depreciation, so if you go over your pre-agreed mileage there will be a fee at the end of your agreement.

It’s important to keep your vehicle in good condition

This is a very logical one, and not really a con, because everyone wants their car to be in good working order, as well as ensuring it’s not covered in scratches and dents.

It’s important to be aware that you need to keep your car in good condition. When your car is returned at the end of your agreement it will be carefully inspected for any damage. If they find anything that’s not covered by the BVRLA Fair Wear and Tear guidelines then you will be charged by your Finance House to get the repairs carried out.

Used cars

So, now we’ve talked about the pros and cons of leasing a new vehicle, it’s time to look at an alternative, a lease on a used car. It’s possible you’ve seen a used car and you are considering leasing options on it. Below we’ve got answers to the questions you should be asking if this is something you’re thinking about.

Can I lease a used car?

Yes, you can. However, the majority of vehicles available to lease are brand-new. It’s incredibly rare for a finance company to have used cars available for lease.

If you do find a used car for lease then you can be reassured that it will be no more than 12 months old, will have gone through stringent inspections and has either been returned after a short-term lease or is an ex-fleet vehicle.

The main reason that used-car leasing is uncommon is that the majority of returned vehicles tend to go to auction where they are often purchased by dealerships to be sold from their forecourts as secondhand cars.

Is it cheaper to lease a used car?

This answer may surprise you, but leasing a used car is actually more expensive than choosing a brand-new vehicle from a factory (or stocklist).

That a used car is more expensive to lease is another reason why it’s not something you will come across often. Why would you want to pay more for a car that already has miles on the clock when you can get something new that’s never belonged to anyone else?

The price you pay for a secondhand lease car is calculated in exactly the same way as it is for a new vehicle. Several things are taken into account when it comes to calculating the price for any leased vehicle. The calculation for this is:

(purchase price – estimated residual value) / months on contract

+ annual mileage

+ admin fee

= monthly payments

It’s logical to think that if you’re considering a lease on a vehicle that’s already 12 months old it would cost less, especially as it’s well-known that a car loses around 30% of its value in the first 12 months. However, at the end of the original agreement, the car is a year older and quite often out of warranty, both of which affect the value of the car. Once depreciation is taken into account, the estimated residual value of the car is also a lot lower.

When you lease a new car, a broker is often able to get significant initial discounts and as the car is also going to be newer at the end of the agreement than a used car on the same length contract, the residual value will also be higher.

When you lease a used car you are also responsible for paying your annual Vehicle Excise Duty (which you will sometimes hear people call RFL or Road Fund Licence) – something that is included when you lease a new vehicle. This additional cost is £150 per year, adding an extra £450 total to a 3-year lease on a used car.

Is it better to lease a new car?

Quite simply, yes!

When comparing a lease on a new car versus a lease on a used car you will find that the sums work out in favour of new, every single time. There are multiple advantages to looking at a new vehicle if you’re thinking about a lease. Not only is it kinder to your bank balance, but there are also several advantages when it comes to the condition of the vehicle (they will have been well-maintained, inspected and any damage repaired), the existence of a warranty and of course, choice.

When you lease a new vehicle you have the chance to design it to your specifications, picking the optional extras you would like; such as extra ISOfix fittings in the back, or a panoramic sunroof (if it’s available). However, if you select a used vehicle, that was designed with the specification of the original lessee in mind, you will be restricted by the choices that they made, and pay more for that choice.