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Traditional car ownership has been in decline in recent years as more buyers consider financing or leasing their new car.

But if you're undecided about whether to buy a car or lease one instead, our guide can help you.


How long do you keep your car?

A big deciding factor whether to buy or lease comes down to how long you keep your car.

If you normally buy a new car and run it for its whole life, then a traditional cash purchase makes the most sense.

However, if you prefer to change cars every few years and have a new vehicle under the manufacturer's warranty, leasing is a much better option. That's because traditional lease deals last between 24 and 48 months, meaning you always have a newer vehicle.

Do you have cash available to buy a new car?

Buying a new car with cash is a big financial commitment. Even an entry-level Ford Fiesta and Volkswagen Golf cost £17,000 and £23,000 respectively these days.

However, if you decide to lease your car you don't have to pay a huge amount upfront because the cost is spread over a period of time.

There's usually an upfront cost though, which depends on the car you opt for and also the deal itself. Most leasing contracts require an 'initial payment', which is usually 3, 6 or 9 months worth of payments.

With AA Smart Lease there is no deposit required.

Do you like to 'own' your car?

It's important to remember that with leasing you never 'own' the car, rather it's a long-term hire agreement – the car belongs to the leasing company.

To many that doesn't matter, but if you prefer to 'own' the car then leasing might not be for you. But you could explore other options such as a car finance agreement or personal contract purchase (PCP).

What about depreciation?

When it comes to buying your own car outright, depreciation is a huge concern. For as soon as you drive your new car out of the showroom, it will nearly always fall in value. And if you like to change your car every few years, that could leave you quite heavily out of pocket.

But with leasing you don't have to worry about depreciation as it's absorbed into the monthly cost.

Depreciation does still affect leased cars though, and you'll often notice cars from more premium brands – which traditionally hold their value better – are not much more expensive to lease than something more mainstream. So because they'll be worth more to the leasing company when you give it back, they can offer them at a lower monthly rate.

What's best value for money?

Deciding on value depends on your viewpoint. For instance, while leasing works out cheaper on paper it's not really an investment, because the car never belongs to you.

However, if actually owning the vehicle doesn't matter to you, then leasing is an affordable way of getting behind the wheel of a new car every few years.

PCH and PCP – what's the difference?

One of the most popular types of car leasing is personal contract hire (PCH), which is easy to get confused with personal contract purchase (PCP), the most popular type of car finance.

There are similarities between PCP and PCH and the concepts are very much the same. With both you make an upfront payment – a deposit in the case of PCP and an initial payment with PCH – followed by monthly payments for a specified amount of time, and with a set mileage limit.

However, the main difference between the two is that usually you don't have the option to own the car at the end of a leasing agreement – rather you just return the car.

But with PCP you have various options. You can either give the car back, like a lease, use the equity from that car towards a new vehicle, or pay an 'optional final payment' to own the car at the end of the agreement.


There really isn't a best option between buying or leasing a car, and it really comes down to your personal preference.

If you like to own your car for many years, buying remains the better option. Yet if you prefer to have a shiny new car that's under the manufacturer's warranty and want to change it every few years, leasing is the more appropriate choice.

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