• 2023-05-10 09:00:10
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Should I Lease or Finance a Car?


If you’re looking for a new car but don’t have the funds to purchase one outright, you have lots of options. You can decide to finance your car with various payment options, or you could decide to lease a car instead. If you’re not sure which one is right for you, read on to find out what’s involved in each option.

How does financing a car work?

Car finance is when you pay for a car by splitting the cost over a period of time, usually three to five years. You will usually pay an initial deposit and then monthly payments, that will have interest added. There are different types of car finance that work in slightly different ways. The two main types are PCP and Hire Purchase – you can find out more about PCP and Hire Purchase in our guide.

Typically, with car finance you will own the car after the payment period has ended. Some types give you the option to choose whether you want to make a final payment to buy the car, or to keep making monthly payments on another car.

With car finance, you will be liable to pay for the servicing and maintenance of the vehicle throughout. You will, however, be restricted to how much you can modify the car, if at all, as you won’t own the car outright until the final payment is made.

You will have to apply for car finance, and whether you’re successful will depend on a variety of factors, including your credit rating. However, there are options for bad credit car finance for those with poor ratings. Most car finance plans will require an initial deposit to be paid before the monthly payments. Missing your monthly payments can negatively affect your credit score.

How does leasing a car work?

Car leasing is when you will hire the car with no intention of ever owning it. Often leasing a car will involve lower monthly payments, although you will typically still need to pay a small deposit. You’ll make the payments for a set period, usually two to five years, after which you will hand the car back to the lease company.

Throughout the period you rent the car, you usually won’t have to pay for servicing or regular maintenance, as this will be covered by the lease company. However, you will still be liable to cover the cost of any damage that the car takes during the period, and you’ll also still have to pay for car insurance.

Some lease deals include a restriction on the mileage you can do, and you also usually won’t be able to modify the vehicle in any way, as you won’t own it.

How to choose between leasing or financing

There are a few things you should consider when you’re deciding whether to lease or finance a car.


Leasing a car can sometimes be the cheaper option, with a smaller deposit and lower monthly payments. You’ll also likely have the added benefit of not having to pay for servicing and maintenance, so leasing can be a great option if lower cost is your priority. However, you could still find cheap car finance if you’re looking for low payments and still want to own the car after the payment period.


Another thing to consider when deciding between leasing and financing is whether you want to own the car after the payment period. Once you own the car, you will be able to modify it as you wish or sell it on. You will also be able to enjoy having a car without having to pay any monthly payments.

However, if you’re not interested in owning your car and/or if you’re keen to regularly change your car, leasing might be a better option.

Credit score

You will need to have your credit score checked for both car finance and leasing. Generally, it can be harder to obtain a car lease if you have a bad credit rating, however, car finance can be more straightforward. If you have a bad credit score, you might find that car finance is the better option for you.

Driving habits

You should consider your driving habits when choosing between leasing a car and financing a car. Leasing a car will typically have mileage limits, so might not be suitable if your driving habits vary over time or if you will be driving long distances. However, if your driving patterns will be steady, leasing could be a good option for you.

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