Leasing Vs Purchase Bank Loan

[PiKe]

Been without a car since April but it's becoming annoying to the point I'm looking at getting another.

I have two options, to lease or buy with a bank loan.

This seems like a no-brainer (assuming I can get the loan) to purchase the car with a 2.9% APR loan and actually own it at the end of the term, but am I missing any advantages of leasing?

 

[a1ex2001]

Been without a car since April but it's becoming annoying to the point I'm looking at getting another.

I have two options, to lease or buy with a bank loan.

This seems like a no-brainer (assuming I can get the loan) to purchase the car with a 2.9% APR loan and actually own it at the end of the term, but am I missing any advantages of leasing?

Leasing means you can pretend you’ve bought a new car every couple of years and look cool in front of all your friends.

 

[PiKe]

Leasing means you can pretend you’ve bought a new car every couple of years and look cool in front of all your friends.

I don't have any friends so seems like the bank loan option sounds like a winner.

 

[Havana_UK]

Leasing means you can pretend you’ve bought a new car every couple of years and look cool in front of all your friends.

As much as people would like folks to believe this it's not quite true.

Leasing means you'll get a brand new car, and SOME deals can be very good and make it a very cheap way to get into a new car, but in general it's the most expensive option to drive a new car. Buying outright will be less expensive in the long term, but the monthly cost will be significantly higher, or looked at another way, for the same monthly cost as a lease you'll be in a much older car if you're buying with a bank loan.

 

[b0rn2sk8]

With a lease someone else is taking the risk, you get a new car with no hassle. If you like to change your car often, leasing is a good option.

The monthly payments will be way less on a lease compared to buying outright for the same vehicle but you obviously just rent it and have nothing left at the end.

 

[Dr House]

I don’t know how you guys are getting loans with 2.9% APR. I have a really good credit score. Never missed a payment on anything. Well paying job And the only credit I have is my mortgage. Credit card always paid off in full. And I still seem to be up at 8 to 13%

 

[b0rn2sk8]

How much are you asking for? Small and large tend have higher rates. Middle of the road loans tend to have lower rates.

It also depends on your salary, the lower your salary the higher the rate.

 

[Rotty]

I don’t know how you guys are getting loans with 2.9% APR. I have a really good credit score. Never missed a payment on anything. Well paying job And the only credit I have is my mortgage. Credit card always paid off in full. And I still seem to be up at 8 to 13%

I always get around the 2.9% mark though that rate only usually goes up to 25k

 

[Psycho Sonny]

I don’t know how you guys are getting loans with 2.9% APR. I have a really good credit score. Never missed a payment on anything. Well paying job And the only credit I have is my mortgage. Credit card always paid off in full. And I still seem to be up at 8 to 13%

Had 3 loans at that rate in the past 3 years.

Paid two of them off now.

Zopa FYI

 

[rodenal]

If you're being offered higher than (say) 3-4% Apr on 4-5 year loans under £25k, have a regular repayment history without any other debt to income type flags it suggests there is something else going on tbh

Might be as simple as you are comparing unsecured loans to car finance, or have no recent evidence of paying back a loan but there is something going on

 

[tom_e]

I don’t know how you guys are getting loans with 2.9% APR. I have a really good credit score. Never missed a payment on anything. Well paying job And the only credit I have is my mortgage. Credit card always paid off in full. And I still seem to be up at 8 to 13%

That's probably why.

Lenders like a bit of history to look at.

 

[chaparral]

I don’t know how you guys are getting loans with 2.9% APR. I have a really good credit score. Never missed a payment on anything. Well paying job And the only credit I have is my mortgage. Credit card always paid off in full. And I still seem to be up at 8 to 13%

Also goes by how much the loan is

My 12k car loan interest rate was far lower then my smaller 4k motorbike loan

 

[peige]

Lease/PCP, your borrowing what the car will depreciate by in the time you own it. Depending on the car this can vary a lot, sometimes a deal can make that a tempting offer and it can all depend on how you view your motoring costs.

Then you get into the whole "are you a mug" buying a brand new car thing too.

 

[Basher]

Lease/PCP, your borrowing what the car will depreciate by in the time you own it. Depending on the car this can vary a lot, sometimes a deal can make that a tempting offer and it can all depend on how you view your motoring costs.

Then you get into the whole "are you a mug" buying a brand new car thing too.

At the moment, it can be cheaper to buy brand new than 1-year old, especially with PCP.

 

[Rotty]

Lease/PCP, your borrowing what the car will depreciate by in the time you own it. Depending on the car this can vary a lot, sometimes a deal can make that a tempting offer and it can all depend on how you view your motoring costs.

Then you get into the whole "are you a mug" buying a brand new car thing too.

you are paying interest on the balloon too afaik so effectively taking a loan for that too and paying to off with the balloon payment or car return

 

[AiiR]

Been without a car since April but it's becoming annoying to the point I'm looking at getting another.

I have two options, to lease or buy with a bank loan.

This seems like a no-brainer (assuming I can get the loan) to purchase the car with a 2.9% APR loan and actually own it at the end of the term, but am I missing any advantages of leasing?

The advantage of the lease is the opposite in that you don't own it. The lease company takes all the risk on the value, for example if you buy a diesel and then in 3 years the demand for them dries up due to stricter regulations.

If new I'd much rather lease than a bank loan.

 

[Jez]

If you've managed completely without a car for some time, then it sounds as though your usage will be borderline optional and for convenience only?

In that case especially i really do not see why you would wish to borrow for the car, or at the very least if you must borrow then why not buy something a bit older for a few thousand and keep the car a non issue financially?

 

[Mercenary Keyboard Warrior]

You didn't mention PCP, although others did.

It sounds like it may suit you more, its kind of in the middle of the lease / buy thing really. Its closest to a lease but a little more flexible.
Sending a lease back early will come with significant costs, it varies by who you go to (so well worth comparing a few) but will typically be 50-100% of the outstanding payments.

PCP often works out well on cars that will depreciate more heavily, as the balloon will smaller the finance cost will be smaller. The manufacturers sometimes give bigger contributions on these cars as they need to shift them so thats a good one to look for.

There is the final consideration, the PCP to loan switch.
Basically as PCP is finance you can withdraw (important term) within 14 days of taking it. So if you find a car that has a high contribution for taking PCP, you do this, then repay that with funds from a bank loan. You will often get a lower price with PCP due to the discount than you would on cash. They don't like people doing this, but cannot stop it so as long as its not over abused it will carry on (check dealer paperwork to ensure the contribution doesnt become repayable, but its highly unlikely).
I got an extra £4k off with Audi for taking PCP as opposed to buying. I then took out a ZOPA loan to repay the finance of the PCP. I wouldnt sign a PCP deal I wasnt happy to see through to the end just in case something went wrong between taking that and getting the other loan, but its a nice gamble if it pays off.

Of course you can also leave the PCP to run where it functions very much like the lease so you can just hand it back at the end, but you may have some equity in the vehicle that functions as a deposit.

The other thing to consider is that both lease and PCP will have extra terms applied, so you need to be more careful at the end than if the car was yours. Typically costs for missing keys, scratches, missing service details etc will be higher than the value you will loose trading in an owned car at a dealer etc. Or plan to have a smart repair guy tidy it up at the end.

 

[Trifid]

If you've managed completely without a car for some time, then it sounds as though your usage will be borderline optional and for convenience only?

In that case especially i really do not see why you would wish to borrow for the car, or at the very least if you must borrow then why not buy something a bit older for a few thousand and keep the car a non issue financially?

I tried this, the hassle of running a older car was too annoying for the amount I used it. I ended up getting a cheap lease, but having done this a couple of times the hassle of changing cars is too much for the use! Going to buy a newer car instead.

Leasing means you can pretend you’ve bought a new car every couple of years and look cool in front of all your friends.

I'll quote this next time someone mentions my Volvo!

 

[a1ex2001]

I tried this, the hassle of running a older car was too annoying for the amount I used it. I ended up getting a cheap lease, but having done this a couple of times the hassle of changing cars is too much for the use! Going to buy a newer car instead.




I'll quote this next time someone mentions my Volvo!

I guess it depends on your luck with the older car my Mondeo is 15 years old now and yes if has a few rattles that weren't there when I got it 11 years ago but touch wood it is reliable and has only thrown two annoyingly big bills in all that time (one for the DMF and the last MOT just had a long list of little bits!) I'll keep driving it until it dies or gets silly expensive to run.