Finance or lease, which is better and why ? In this article, we explore the hot topic of car leasing in the Uk.
Why would you lease a car or why you would pay cash or use another form of finance?
We will help you to make the right decision for you or for your business, so first let us explore the differences if you are an individual.
1. Depreciation
First, try to think of how long you want to keep the vehicle or how long you usually change your vehicles.
Depreciation will play a big part in your decision, most cars will loose a large percentage of their value in the first 18-24 months.
So work out if you plan to purchase and then replace after 2 years will you lose more in depreciation or spend more in lease payments?
2. Mileage
If you do a lot of miles you will find that once you try to match the mileage on a lease offer with miles that you will cover could work out very expensive. Some of the advertised lease deals are based on low mileage of 5,000 per year with up to 25p per mile charged over that.
3. Age of vehicle
Do you need a new car or do you want to replace your car regularly? Or could you possibly use that money for other investments?
If you calculate the amount you spend on lease payments against buying a car and keeping it longer.
How much would you have saved?
4. Maintenance
The one benefit of having a regular new vehicle is not having to pay for expensive maintenance. You will still be responsible for tyres, brakes and items that may need replacing during the term but hopefully, you will avoid any large expensive repairs.
For your business
There are a few more considerations if you are leasing a car in your business name.
The most beneficial is that you should be able to claim the vat back on lease payments (provided you are vat registered) and you can get a tax write off on the monthly payments.
You can usually get a better deal on a business lease as the vat is normally factored into the monthly payments for an individual.
If you have any questions we can be reached at tony@kingsgatefinance.co.uk or 020 3959 9490