Compare the true cost of leasing vs buying a car in the UK. Calculate total spend, equity built, and flexibility value over 3-5 years.
It depends on your circumstances. Leasing typically has lower monthly payments and no large depreciation hit when you return the car. Buying means higher payments but you retain equity — the car's residual value is yours. For frequent car changers (every 2-3 years), leasing is often cheaper. For those who keep cars 5+ years, buying outright or via PCP and keeping it is usually cheaper per mile.
Advantages of leasing: lower monthly payments vs HP, always driving a newer car with warranty, included maintenance packages available, no depreciation risk, fixed budgeting. Disadvantages: you never own the car, mileage limits apply (excess pence per mile charge), no equity built, finance agreement must be kept for full term.
PCP (Personal Contract Purchase) gives you the option to buy the car at the end by paying the Guaranteed Future Value (GFV). Personal Contract Hire (PCH/leasing) requires you to return the car at the end — there is no option to buy. PCP usually has a larger final optional payment; PCH has no final payment but no asset either.
Yes — all car finance agreements (HP, PCP, PCH) are recorded on your credit file. Meeting payments on time builds positive credit history. Missing payments damages your score. Hard credit searches when applying for car finance can temporarily reduce your score. Multiple applications in a short period can signal financial stress to lenders.
For sole traders and limited companies: business car lease payments are tax deductible, but if the car emits over 50g/km CO2, only 85% of the lease rentals are deductible (the 15% disallowance). For 100% deductibility, the car must emit ≤50g/km CO2. Company car tax (BIK) applies to employees using the company car for personal use.