Lease or buy a car? See pros & cons before deciding

"To lease a car, or to buy a car, that is the question."

If you can't decide between buying or leasing a car, then our guide will help you.

What is the difference between leasing and buying?

The key difference between buying and leasing a car is ownership of the vehicle, but this could be a positive or negative depending on your situation.

In general, leasing will offer more flexibility and likely cost less. Buying a car will likely to be more expensive, but could give you greater stability and the benefits of ownership.

Leasing a car gives you access to a vehicle for an agreed period, which can be for personal or business use, or a combination of the two. You will generally make regular payments over the course of the lease and may have the option to buy the car, or starting leasing a new vehicle, at the end of the lease term.

Buying a car involves you purchasing a vehicle so that you own the vehicle outright. You can either make your purchase using a car loan, which can be paid off in a period of up to seven years, or by buying the vehicle using your own savings. You are then free to use the vehicle as you wish, as well as sell it.

leasing vs buying a car

Buying vs leasing: Pros and cons

	Pros	Cons
Leasing	Does not tie you down to a single vehicle and gives you the option of upgrading your car every two or three years Requires less upfront money Is an option for people who travel frequently and need a car in different locations Leasing may be a good option for businesses who don't want their cash flow tied up in a depreciating asset Often sill covered by the manufacturer's warranty, so servicing and ongoing maintenance charges are usually covered	In the long term, leasing a car may be just as or more expensive than a car loan when you take into account monthly repayments, fees and charges You are unable to make any alterations to the car You cannot claim the car as your own asset for other borrowing or financial purposes
Buying	If you decide to take out a loan your repayments will be similar to what you would pay when you were leasing, but at the end of the term you will own the car outright Whether you take out a car loan or buy the vehicle outright, you can still claim the car as your own asset.	May require a larger upfront cost The value of the car depreciates in time, making your investment less valuable

What financing options are available for cars?

Secured personal loan. A personal loan that is secured works by you using the car as a guarantee in order to finance it. This is less of a risk for the lender as they can sell the car should you default on the loan. These loans generally have lower rates and fees and are offered as a fixed or variable rate option.
Unsecured personal loan. An unsecured personal loan can not only be used to finance a vehicle, but can also be used for any other purchase you wish to make. These loans are flexible but they usually come with higher fees and rates because it is a risk to the lender.
Dealer finance. If you purchase a car from a dealership then they will most likely have a financing option they are able to offer you. It's best to do your research before you sign up as dealer financing usually comes with inflated rates and high fees. Dealer finance usually comes with a balloon payment at the end that is designed to lower your ongoing repayments.
Novated lease. A novated lease is basically a lease agreement between you, your employer and the lease provider. Some of your lease obligations are transferred to your employer and as such your car is treated like a company car for tax purposes. This type of lease can save you money by allowing you to access benefits such as GST discounts, income tax savings and savings on the cost of running the car.

Compare your leasing and car loan options

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1 - 13 of 92

Name	Interest Rate (p.a.)	Comp. Rate (p.a.)	Application Fee	Monthly Fee	Monthly Repayment
IMB New Car Loan Fixed1 - 7 Years $2,000 - $125,000	Interest Rate (p.a.) 6.24%	Comp. Rate (p.a.) 6.59%	Application Fee $274.78	Monthly Fee $0	Monthly Repayment $619.01	Go to site More info Compare	Borrow up to $125,000, pay no account-keeping fees and repay with fixed repayments while having the ability to repay early.
Stratton Finance New Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.52% to 18%	Comp. Rate (p.a.) 6.95% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $625.27	Go to site More info Compare	Your own personal car loan broker can help you borrow up to $300,000 for your new car by choosing from a range of finance options.
loans.com.au - New/Demo - Variable Rate Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 5.99% to 7.14%	Comp. Rate (p.a.) 7.12% to 8.27%	Application Fee $400	Monthly Fee $8	Monthly Repayment $628.52	Go to site More info Compare	Borrow up to $150,000 with rate discounts for electric and hybrid vehicles, flexible terms, early repayment options, and a 3-month pre-approval period.
Great Southern Bank Fixed Rate Car Loan Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.29% to 12.99%	Comp. Rate (p.a.) 6.75% to 13.48%	Application Fee $325	Monthly Fee $0	Monthly Repayment $621	Go to site More info Compare	You'll receive a fixed rate of 6.29% p.a. A secured loan with a high maximum borrowing amount up to $100,000. Redraw facility and no monthly fees.
OurMoneyMarket New Car Loan ($5,000-$100,000) Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.57% to 18.99%	Comp. Rate (p.a.) 7.19% to 21.78%	Application Fee 1.5% - 6%	Monthly Fee $0	Monthly Repayment $622.82	Go to site More info Compare
RACV New Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 6.99% to 17.99%	Comp. Rate (p.a.) 7.69% to 18.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $632.86	Go to site More info Compare	You'll receive a fixed rate from 6.99% p.a. A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.
Simplify New Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.19% to 18%	Comp. Rate (p.a.) 6.6% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $622.21	Go to site More info Compare
OurMoneyMarket Used Car Loan ($5,000-$100,000) Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.57% to 18.99%	Comp. Rate (p.a.) 7.19% to 21.78%	Application Fee 1.5% - 6%	Monthly Fee $0	Monthly Repayment $622.82	Go to site More info Compare
Stratton Finance Used Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.52% to 18%	Comp. Rate (p.a.) 6.95% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $625.27	Go to site More info Compare	You'll receive a fixed rate loan from 6.52% p.a. with a comparison rate of 6.95% p.a. A used car loan of up to $300,000 with quick approval times and balloon payment options.
loans.com.au - Variable Rate Used Car < 5 years Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.14% to 7.14%	Comp. Rate (p.a.) 8.27% to 8.41%	Application Fee $400	Monthly Fee $8	Monthly Repayment $639.2	Go to site More info Compare	Buy a used car up to 12 years old with a loan of up to $150,000 and pay off up to one year early without paying early repayment fees.
Simplify Used Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.19% to 18%	Comp. Rate (p.a.) 6.6% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $622.21	Go to site More info Compare
RACV Used Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 8.19% to 17.99%	Comp. Rate (p.a.) 8.9% to 18.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $644.16	Go to site More info Compare	You'll receive a fixed rate from 8.19% p.a. Benefit from no ongoing fees, 5-hour approval and a 21-day satisfaction guarantee. Interest rate discounts for members.
loans.com.au - Variable Rate Used Car < 3 years Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.14% to 7.14%	Comp. Rate (p.a.) 8.27% to 8.41%	Application Fee $400	Monthly Fee $8	Monthly Repayment $639.2	Go to site More info Compare

Showing 13 of 13 results

1 - 6 of 6

Product	Price Per Week (from)	Insurance Included?	Membership Fee	Excess Distance Cost
Splend Flexi	$188	Yes	$275 (26 week rental period)	$0.10 per km	Get access to fuel discounts, referral bonuses and member only benefits when you rent a rideshare car with Splend. Flexi and Flexi own options available.	More info Compare	loading Fetching your data...
DriverLend	$77	No	$0	$0 per km	Driverlend is a finance broker. Lease or buy a car with Driverlend and you could get up to 20% discount on dealership prices for a new vehicle.	More info Compare	loading Fetching your data...
DriveMyCar Uber Rentals	$160	Yes	$0	$0.10 per km	Get insurance, maintenance and 24-hour roadside assistance in the all-inclusive price. Discounts available for longer rental periods.	More info Compare	loading Fetching your data...
Europcar Uber Rental	$225	Yes	$0	$0.25 per km	Benefit from 24/7 roadside assistance, a wide range of vehicles and no signup fee to start driving with Uber. A minimum four-week rental period applies.	More info Compare	loading Fetching your data...
Hertz Uber Rental	$217	Yes	$0	$0 per km	Benefit from 24/7 roadside assistance, no lock-in contracts and no joining fees. Rego and comprehensive insurance are included in the cost.	Compare	loading Fetching your data...
Splend Flexi own	$319	Yes	$990 (Joining fee)	$0.10 per km	Rent a car and pay it off as you go with no lock-in contract, membership benefits and flexible rental options	More info Compare	loading Fetching your data...

Frequently asked questions about leasing or buying a car

How often will you be driving the car?

Leases usually require you to drive an average amount of kilometres annually, so you need to consider this before you apply.

Do you own a car now?

If you already own a car and are looking at purchasing a new one you may be able to take advantage of a trade-in offered by some dealerships. You also have the option of selling a car to be able to put more money on a lease upfront

Will the car be for business or personal use?

If your car is mainly for business use you may be able to work out a novated lease with your employer, or if you are opting for a personal car you need to consider how you will be using it and whether a lease or purchase will be best for you.

Will you have to pay maintenance costs?

Whether you have to pay servicing or maintenance costs will depend on your lease agreement. These costs may be entirely included in your lease, you may have to cover some servicing costs (such as oil changes), or you may have to pay extra for a maintenance package.

What is your credit history like?

Leasing companies may not approve you for a lease if you have bad credit history, but then again some loan providers may not approve you either. If you have negative marks on your credit file you might want to consider a secured loan, as this is seen as less of a risk for the lender you may have a better chance of being approved.

Picture: Shutterstock

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Written by

Matt Corke

Head of Publishing Ventures

Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio

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29 Responses

AriNovember 4, 2015

I am contemplating of purchasing a medium size car (i.e. mazda 3 or toyota camry) outright / no loans versus leasing.
The car will mainly be used to travel to work, and occasional work purposes, site visits / meetings, etc.
So, overall annually the car will probably travel around 12,000 km.
Considering the cap servicing, petrol cost, insurance and rego; greatly appreciated if you would advise the better option between outright purchase and leasing.
Many thanks.

Finder

ElizabethNovember 4, 2015Finder

Hi Ari,

Thanks for your question.

It’s hard to advise on your best option as it’s really up to you. In generic sort of terms, buying a car outright will mean that you hold an asset, although that asset will be depreciating and will put a dent in the savings that you have. Taking out a lease means you will not hold an asset but you will still use of the vehicle.

It also depends what kind of leasing you are referring to – if you are buying the car for work you could consider a novated lease, where you would pay for your car out of your pre-tax income. Depending on the type of work you do a chattel mortgage could also be an option for you.

There are other factors that come into play here – the kind of car insurance you get will affect how much you spend, etc.

It may help to actually put down the numbers to find out the most cost-effective method of obtaining and maintaining your vehicle, and then decide whether owning asset matters to you.

Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

I hope the information on these pages will be of some use.

Thanks,
Elizabeth

KarenJune 28, 2015

I drive over 50,000 kms a year as a sales rep needing a SUV for my working needs, am I better of leasing a car over purchase as I get a car allowance for my work.

Finder

ElizabethJune 29, 2015Finder

Hi Karen,

Thanks for your question.

You can learn about leasing or buying a car and weigh up the pros and cons in terms of your own situation. You can also read about commercial hire purchases. Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

I hope this has helped.

Thanks,
Elizabeth

TrevorJune 16, 2015

What is the better purchase option. Novated lease or 2% finance dealer promo as a loan.

Finder

ElizabethJune 17, 2015Finder

Hi Trevor,

Thanks for your question.

There’s benefits to both of those options, and the best purchase decision is going to come down to your needs and your situation. You can find out more about novated leases and you can see a comparison of lenders that offer dealership finances and car loans. Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

I hope the information on those pages can help you come to a decision.

Thanks,
Elizabeth

SasJune 16, 2015

Hi looking to buy a car soon….
Is there such a thing as a novated lease for personal use ??? So no employer involved

Finder

ElizabethJune 16, 2015Finder

Hi Sas,

Thanks for your question.

A novated lease is an agreement between you, your employer and a third-party lender, so unfortunately you’re unable to take out one of these without having your employer involved. These type of leases can be for personal use, but this salary sacrifice element still means your employer will need to be aware of it and agree to it.

I hope this has helped.

Thanks,

Elizabeth

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