Pros & Cons of Leasing a Car (2023 Guide)

If you’re weighing up whether to lease a car or buy one, this guide will give you a clear understanding of the pros and cons of leasing so you can decide with confidence if it's right for you.

The aim here isn’t to convince you either way, but rather to give you a realistic picture of both the benefits of car leasing and the downsides. We’ve rounded up five of each.


Benefits of leasing a car

These are the five main benefits of leasing a car for UK drivers.

1. Lower regular repayments

When you lease a car, generally you will have lower repayments than you would if you were paying off a car loan. The reason is simple: you are only renting the car – you’re not paying off the full value of the vehicle. 

Let’s look at an example based on a Hyundai Tucson valued at around £30,000:

On a four-year lease, the monthly payment would be around £310, compared to around £720 per month on a four year car loan (assuming an annual interest rate of 7%).

This lower monthly payment can free up cash in your household budget to be used elsewhere. The main trade off of the lease versus buying the car with a loan is that you won’t own the car at the end of lease.

2. Option to reduce up-front payment

Car leases are quite flexible in terms of how the payments can be set up. This means it’s often possible to get a car lease with no deposit required. Instead, your ‘initial rental’ is the same as every other payment you’ll make during the lease. 

If you need access to a car but don’t have sufficient cash savings to make a deposit – or you don’t want to make a large payment up front – a car lease is often the only option available.

3. Access newer vehicle models

Because your regular payment is lower, a car lease may mean you can afford to access a newer model of car than you would be able to if you were buying the car. In fact, many car leases are for a brand-new car.

The advantages of a newer car in terms of the driving experience and safety are fairly self-explanatory, but there are also some other practical advantages of driving a newer car. The main ones are having little to no maintenance costs, and no MOT for the first three years.

4. You don’t need to sell or trade in the car when you want to replace it

Another benefit of car leasing relates to what happens at the end of the lease. At that stage, you can simply hand the car back with very little fuss or concern about how much depreciation has reduced its value by. 

If you want, you can then start a new lease with a new car and repeat the process.

Compare this to what would have happened if you had bought the car. You’d need to either sell it privately which can be time consuming and a bit of a pain, or trade the car in when you buy your new car. Trading in is usually easier but you probably won’t get as much for the car as you would have by selling it yourself. The car dealer will want to make a profit after all.

Getting a car lease makes for a far more hands-off experience at the end.

5. Maintenance and other costs can be included in the lease

Car tax is usually included automatically, but other costs of running your car can be included with your lease. Maintenance is the main one. What this means is you pay a bit extra per month to have the servicing and any repairs taken care of as they arise.

You may also have the option to include your car insurance with your lease. This won’t necessarily save you money, but it will be one more expense you don’t need to budget for and pay separately.

Disadvantages of leasing a car

And here are the five main disadvantages of leasing a car to consider.

No-deposit car lease example

1. You never own the car

For the whole duration of the car lease and after it ends, the car belongs to the company leasing it to you. During the lease, there is little practical difference between leasing and owning your car (although there are some distinctions). The main difference is what happens when the lease term ends. Specifically, with a lease you have no opportunity to recoup your costs by selling the car.

Depending on the make and model, and the condition it’s in, a used car can attract a high price. But as a leaser, it will be the lease company, and not you, taking advantage.

2. You can’t modify the vehicle

Another disadvantage of leasing and not owning your car is being limited in what you can do with it. For example, you generally won’t be able to modify the vehicle to your liking. In particular, modifications that limit the resale potential of the vehicle are almost always off the table. 

Minor modifications may be allowed, but you’ll need the lease company’s permission before you go ahead.

3. Restrictions on usage

At the start of the lease, you’ll need to agree to a maximum annual milage limit (the cost of your lease is partly based on this). You won’t be able to exceed this limit without facing additional fees when the lease ends.

If your driving habits change and you need to increase or decrease your mileage limit, you’ll need to get the lease company’s agreement to do this and there may be an admin fee for making the change.

There can be other practical restrictions like needing the lease company’s permission if you want to take the car on an overseas holiday.

4. There are fees if you damage the car

When you hand back the car you’re leasing, it will be thoroughly inspected by the lease provider. If there is damage beyond acceptable wear and tear, you will be charged a fee to cover the cost of repair or to reflect the diminished value of the vehicle due to the damage.

Accidents, scratches and spillages happen, but if you’re leasing a car, expect a direct cost when your lease term is up.

5. It can be expensive if you end the lease early

Let’s say you’re locked into a three-year lease, but you need to move overseas for work and want to end the lease after only a year. 

There would be considerable fees for doing this because lease companies ensure they are protected against potential lost revenue. The early-termination fees also reflect the fact that the cars the provider is leasing depreciate in value faster at the start of the lease.

It's not uncommon for an early termination penalty that’s the equivalent of 50% of the remaining lease payments to apply.


Overall, is leasing a car the best option?

While this very much depends on your own situation, understanding the pros and cons of a car lease will give you a good idea of whether it’s going to suit you.

Answering these questions will also help you self-assess whether you’re going to benefit from a car lease:

  1. Do you want/need to keep your up-front costs as low as possible?

  2. Will you be able to keep the car in very good condition or could there be damage, stains and spills?

  3. Will you be able to see the full lease through?

  4. Do you value having the ability to modify the vehicle to your tastes?

  5. Do you prefer to be debt-free?

  6. Do you like being able to drive a brand new car as much as possible?

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