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Vehicle Leasing Vs Financing


Vehicle Leasing Vs Financing – Leases and finance agreements can be cost-effective alternatives to buying a car from a dealership. On the surface, they seem similar, so it can be difficult to choose which is the best option for you. Don’t worry, we’re here to expel the myths and explain the differences clearly, so you can make your first payment with confidence.


What’s the Difference between Leasing and Financing a Car?

Both financing and leasing involve splitting the price of a car into affordable monthly payments. They enable you to have a new car for work and personal use without breaking the bank with a single payment. Splitting the cost gives you access to a wide range of cars that may be out of your price range, from executive saloons to small run-arounds. Whatever you need, there’s always a lease or finance option.

Leasing is also known as a Personal Contract Hire (PCH) whereas car financing can be known as a Hire Purchase (HP) or Personal Contract Purchase (PCP). The acronyms are similar, adding to the confusion when trying to understand both, so for this blog we’ll be sticking to leasing and financing.

Both financing and leasing offer ‘depreciation protection.’ All cars depreciate in value as soon as you turn the key, and it is never a predictable decrease. The fixed payment system may save you money as they never change during your agreement. With PCP financing you can buy the car at the end of your agreement, and if it held its value, you’ll have a beneficial asset. If you take out a Hire Purchase agreement then you will own the car at the of the agreement anyway, without having to make a balloon payment.

There are major differences between leasing and financing. Here is a table to explain them simply, with more detail below:



Long-term Rental



Long-term Rental, but with option to buy (PCP only)


Only Covers New Cars*



Covers New and Used Cars


No Interest on Payments



Agreement may include Interest


Flexible Contract Options



Flexible Contract Options


Mileage Limits



Mileage Limits (PCP only)



Charges for Damage and/or Wear



Charges for Damage and/or Wear (PCP only)


*Some lease agreements cover used cars too

Pros and Cons of Leasing a Car

Leasing a new car is an easy way to put a new car on your drive without one large payment. Ideal for commuters, leasing is commonly used by businesses to provide company cars, but personal contracts are an option too.

The main benefit of leasing is the flexibility. The agreement you sign can vary depending on the following:

  • How long you need the car
  • How many miles you expect to cover per year
  • How much you are willing to pay upfront

If you are only using your car for commutes and/or the school run, it can be easy to figure out how many miles you’ll be covering. Then you can choose a contract that covers that distance plus a little extra for trips out or holidays.

By paying more upfront, your monthly payments will be less. This is ideal if you have money for a car saved up already but would rather lease something out of your price range. Both leasing and financing gives you access to higher-spec vehicles without spending too much.

Going over the mileage limit will result in fines that will be added to the end of your contract, so staying under the limit is important. Any damage and excessive engine wear will also need to be paid for.

Another disadvantage is that getting a lease agreement can take time. If you need a car for work, this gap between agreements can be costly and frustrating.

In short, leasing is ideal for someone who needs a car for work or personal use. If you are a careful driver and a good forward planner, leasing is a great alternative to buying a car. However, before you start looking for a lease, you should consider your other options.


 Pros and Cons of Financing a Car

The main benefit of car finance is that you are purchasing the car, not renting it. With a PCP, once your monthly payments are complete, you have the option to make one final payment and take the car home forever or return it to the lender. With HP, you will own the car once the final repayment is made. So, if you’re looking to buy a new or used car, but want a more affordable option, financing could be ideal.

Finance agreements are even more flexible than leases. Here are the factors to consider:

  • How long you need the car
  • How many miles you expect to cover per year
  • How much deposit you are willing to pay, if any*

*Some agreements can be deposit-less, but the monthly payments will be higher.

These options are similar to leasing but remember that you’ll either own the car or be able to purchase it at the end of your agreement. With a PCP, the monthly payments only cover part of the car’s value – effectively the value it loses over the length of the contract – plus interest (unless you have a 0% APR agreement).

These monthly payments are generally lower than leasing, and buying the car is optional. You can hand the car back, like a lease, and pay off any excess mileage fees or damage fines.

Finance agreements can be more personalised and can even be changed partway through the contract. For example, if during the contract you have children, you can upgrade to a bigger car. However, this can be complicated, and will involve extra payments, so plan carefully before making the decision to change.

Financing a car is a more affordable alternative to buying. With access to both new and used cars, you have a huge variety to choose from. If you aren’t sure what to look for, try our Finance Calculator to see what options you have.


Should I Lease or Finance a car?

Now you know what the differences are, which is right for you?

We personally recommend the finance option (after all, it’s what we do!) as it has more flexibility and allows you to purchase the car once the payments are made.

If you are looking for a brand new car for a set period of time and are happy to hand it back when the time comes, leasing is ideal, but not the only option. Our advice is to look into both options before committing to either. Just remember to choose Match Me for the best car finance deals in the UK!

For more information, and answers to any questions, please get in touch. We look forward to hearing from you!

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Match Me Finance Ltd (Company No. 11224794)T/A Match Me Car Finance is authorised and regulated by the Financial Conduct Authority (FRN No. 803714). We are registered with ICO (Information Commissioner’s Office) (No. ZA322036). Applicants must be 18 or over, terms and conditions apply, guarantees and indemnities may be required. We are a credit broker, not a lender. All finance is subject to status and income. Written quotations on request. We can introduce you to a limited number of finance providers and other brokers who may be able to offer you finance facilities for your purchase. We will only introduce you to these finance providers. We may receive a commission payment from the finance provider if you decide to enter into an agreement with them.