Car Leasing vs Buying: Which Is Cheaper in 2027?

A Complete UK Guide

Published: 10 November 2026 | By Aaron Walker | Applied Leasing

Is it cheaper to lease or buy a car in 2027? It's one of the most common questions facing UK drivers looking for their next vehicle.

With vehicle prices, finance costs, depreciation and everyday running expenses affecting household budgets, understanding the differences between leasing and buying can help drivers make informed decisions.

The short answer: Leasing can offer competitive costs for drivers who prefer a new vehicle every few years. Buying can be more cost-effective over the longer term, particularly when a vehicle is kept for several years after any finance has been repaid.

However, neither option is guaranteed to be cheaper.

The overall cost depends on the vehicle, mileage, finance terms, length of use, running costs and eventual resale value.

At Applied Leasing, a family-run UK vehicle leasing broker established in 1990, we explain how the two options work, compare illustrative costs and highlight the factors that can affect the total amount paid.

1. Car Leasing vs Buying: At a Glance

Important comparison point: Advertised monthly payments do not tell the full story. A meaningful comparison considers the total financial commitment over the same period, with equivalent mileage and running-cost assumptions.

Road Tax (Vehicle Excise Duty): With Personal Contract Hire, Vehicle Excise Duty (VED) is normally included for the duration of the agreement. However, changes to government VED rates may result in additional charges, depending on the finance provider and contract terms. When purchasing a vehicle, the registered keeper is normally responsible for paying the applicable VED, including any future increases.

For current rates, see the official GOV.UK Vehicle Tax Rates.

2. How Does Car Leasing Work?

Personal Contract Hire (PCH) allows you to use a vehicle for an agreed period in return for an initial rental and regular monthly payments.

You select a vehicle and agree the contract length, annual mileage allowance and initial rental profile.

At the end of a standard PCH agreement, you normally return the vehicle to the finance provider, subject to the agreement's terms and return conditions.

The initial rental is an upfront payment towards hiring the vehicle. It is not normally a refundable deposit.

Advantages of Car Leasing

• Access to a new vehicle without paying its full purchase price.

• Predictable scheduled rental payments.

• No need to arrange the vehicle's resale.

• Reduced direct exposure to changes in the vehicle's residual value.

• Opportunity to change vehicles when the agreement ends.

Disadvantages of Car Leasing

• You do not own the vehicle.

• Contractual mileage restrictions apply.

• Excess mileage or damage beyond the applicable return standards may result in additional charges.

• Early termination can be expensive.

• Insurance, servicing and other running costs are usually additional unless included.

Leasing may appeal to drivers who prefer changing vehicles every two to four years and have relatively predictable mileage.

For further information, see our Personal Contract Hire guide and Step-by-Step Car Leasing Guide.

You can also read independent information from MoneyHelper about Personal Contract Hire.

3. How Does Buying a Car Work?

Buying a car means acquiring ownership, either immediately or after completing the requirements of an appropriate finance agreement.

There are several ways to purchase a vehicle.

Cash Purchase

You pay the full purchase price and own the vehicle immediately.

There are no vehicle finance repayments, but your money is tied up in the car and you bear the risk of depreciation.

Hire Purchase (HP)

Hire Purchase normally involves an initial deposit followed by regular instalments.

The finance provider owns the vehicle during the agreement. Ownership normally transfers to you once all required payments and any applicable option-to-purchase fee have been made.

For further information, see MoneyHelper's Hire Purchase guide.

Personal Contract Purchase (PCP)

PCP generally involves an initial deposit, regular monthly payments and an optional final payment.

At the end of the agreement, the customer may have options to return the vehicle, subject to the agreement's conditions, or make the optional final payment to acquire ownership.

Completing the regular monthly payments does not automatically mean the customer owns the vehicle.

Read our Personal Contract Purchase explained guide.

Personal Loan

A personal loan can be used to purchase a vehicle.

The customer normally owns the vehicle from the point of purchase while remaining responsible for repaying the loan under the agreed terms.

Advantages of Buying

• The opportunity to own the vehicle.

• Freedom to keep it for many years.

• No contractual mileage limit once owned outright.

• Potential to recover part of its value when sold.

• Greater flexibility to modify or sell the vehicle once owned.

Disadvantages of Buying

• A larger upfront commitment or finance obligation.

• Exposure to depreciation.

• Responsibility for repairs and maintenance.

• Possible finance interest and fees.

• Responsibility for selling or part-exchanging the vehicle.

4. Illustrative Cost Comparison: Leasing vs Buying Over Three Years

To understand how costs can differ, consider two hypothetical customers using an equivalent new vehicle over 36 months and covering the same mileage.

For this example, the vehicle has an assumed purchase price of £35,000.

One customer leases the vehicle through Personal Contract Hire. The other purchases it outright and sells it after three years.

These figures are illustrative and do not represent a current Applied Leasing quotation, verified vehicle valuation or guaranteed future resale price.

Example A: Leasing the Vehicle

Cost	Illustrative amount
Initial rental	£2,700
Monthly rental	£300
Number of subsequent monthly rentals	35
Total subsequent rentals	£10,500
Assumed broker administration fee, including VAT	£360
Total illustrative leasing payments	£13,560

Calculation: £2,700 + (35 × £300) + £360 = £13,560

This assumes one initial rental followed by 35 monthly rentals.

At the end of the agreement, the vehicle is returned to the finance provider, subject to the applicable terms.

The customer does not own the car and does not receive any resale proceeds.

Example B: Buying the Same Vehicle Outright

Cost	Illustrative amount
Assumed purchase price	£35,000
Assumed resale value after three years	£21,000
Net illustrative depreciation cost	£14,000

Calculation: £35,000 − £21,000 = £14,000

The owner sells the vehicle at the end of the three-year comparison and receives the assumed £21,000 resale proceeds.

The £14,000 represents the vehicle's assumed depreciation, rather than its complete ownership and running costs.

Which Option Costs Less in This Example?

Comparison	Leasing	Buying outright
Illustrative three-year cost	£13,560	£14,000
Difference	£440 less	£440 more
Own the vehicle at the end?	No	No, because it has been sold
Receive resale proceeds?	No	Yes, £21,000 assumed

Under these assumptions, the illustrated lease costs £440 less than the purchased vehicle's assumed depreciation over three years.

However, the outcome changes if the resale value changes.

If the purchased vehicle sells for £23,000 rather than £21,000, its depreciation falls to £12,000.

In that alternative scenario, buying would cost £1,560 less than the illustrated lease.

Important Information About This Comparison

The figures are hypothetical and are not a current Applied Leasing quotation, a guaranteed saving or a verified resale forecast.

The example assumes equivalent vehicles, the same period and mileage, and a cash purchase with no borrowing interest.

It excludes insurance, fuel or electricity, servicing, maintenance, tyres, Vehicle Excise Duty (VED), including any applicable increases, charging equipment, the opportunity cost of cash, excess mileage charges, damage charges and other potential costs.

The assumed £360 broker administration fee includes VAT and is used for illustration only. Actual administration fees vary depending on the arrangement and are confirmed in the relevant quotation and customer documentation.

For details of Applied Leasing's administration fees and applicable charges, please read our Information Notice.

Important comparison point: Compare actual leasing quotations against realistic vehicle resale estimates and the full costs of each arrangement, rather than relying on monthly payments alone.

5. Why Depreciation Matters When Comparing Leasing and Buying

Depreciation is the reduction in a vehicle's market value over time.

For example, if a vehicle is purchased for £40,000 and sold three years later for £24,000, it has lost £16,000 in value.

That represents a cost of ownership, even where the vehicle was purchased outright without finance.

Depreciation can be influenced by:

• Manufacturer and model.

• Vehicle age and mileage.

• Condition and service history.

• Market demand.

• Specification and technology.

• New vehicle prices and manufacturer incentives.

With standard contract hire, the finance provider generally bears the direct risk associated with the vehicle's eventual resale value.

This may appeal to customers who prefer changing vehicles regularly without needing to arrange their resale.

However, contract hire customers remain responsible for meeting their agreement's conditions, including mileage limits and vehicle return requirements.

6. Is Leasing Cheaper Than Buying with Finance?

Buying a car using finance can increase its overall cost because interest and fees may apply.

For example, a Hire Purchase agreement usually includes a deposit, monthly repayments, interest and any applicable final ownership fee.

PCP agreements work differently because customers may have an optional final payment if they wish to acquire ownership.

How to Compare the Costs

For Personal Contract Hire:

Consider the initial rental, all subsequent rentals, broker administration fee and any expected additional costs.

For Buying Outright and Selling Later:

Consider the purchase price, eventual resale proceeds, running costs and the potential cost of tying up cash in the vehicle.

For Buying Using Finance:

Consider deposits, repayments, interest, fees, settlement obligations and the vehicle's value at the end of the comparison period.

For PCP, the appropriate comparison depends on whether the customer intends to return the vehicle or acquire ownership.

Where ownership is intended, the optional final payment must be included in the overall financial commitment.

A lease's monthly rental should not be compared directly with a PCP monthly repayment without considering the total commitment and end-of-contract arrangements.

7. Is It Cheaper to Lease or Buy a Car for Five Years or Longer?

The longer a purchased vehicle is kept, the more competitive buying may become.

For example, a customer who buys a reliable vehicle and keeps it for eight years may spread its purchase cost over a much longer period.

Once any purchase finance has been repaid, the owner may have no further monthly vehicle finance payments.

However, maintenance, insurance, vehicle taxation and other running costs continue.

By comparison, someone who leases successive vehicles will generally continue making rental payments under each new agreement.

Older vehicles can also require more repairs and maintenance, meaning long-term ownership costs are not always predictable.

When Buying May Appeal

Buying may appeal to customers who:

• Plan to keep a vehicle for many years.

• Cover unusually high or unpredictable mileage.

• Want ownership and resale flexibility.

• Prefer not to have continuing leasing payments.

• Are comfortable with depreciation and potential repair costs.

When Leasing May Appeal

Leasing may appeal to customers who:

• Prefer a newer vehicle every few years.

• Want predictable scheduled rental payments.

• Do not want to arrange vehicle resale.

• Have relatively predictable annual mileage.

• Prefer not to pay the full purchase price upfront.

The overall financial outcome depends on the vehicle, its use and the relevant costs.

8. Electric Cars: Is Leasing or Buying Better?

Electric vehicles introduce additional factors into the leasing-versus-buying comparison.

These include:

• Battery technology and warranty cover.

• Home and public charging costs.

• Driving range and charging requirements.

• Vehicle taxation.

• Depreciation and resale values.

• Changes in vehicle technology.

Leasing an electric vehicle may appeal to customers who want access to newer technology without directly managing the vehicle's eventual resale.

Buying may appeal to customers who intend to keep an electric car for many years.

However, electric vehicle resale values vary by model, age, condition, mileage and market demand.

Future changes to vehicle taxation and other ownership costs may also affect the comparison.

For further information, explore:

• Is Electric Car Leasing Still Worth It in 2027?

• Explore Electric Car Leasing

9. Five Questions to Consider When Comparing Leasing and Buying

1. How Long Will I Keep the Vehicle?

The length of time a vehicle is used can significantly affect the overall cost comparison.

Regular vehicle changes may involve different financial commitments from long-term ownership.

2. How Many Miles Will I Drive Each Year?

Leasing agreements normally include mileage allowances.

Higher or unpredictable mileage can affect the available rental options and potential excess mileage charges.

3. Is Ownership Important?

Buying outright or completing an appropriate purchase finance arrangement can provide ownership.

Standard Personal Contract Hire does not normally provide an option to purchase the vehicle.

4. What Is the Total Financial Commitment?

Consider initial payments, monthly commitments, insurance, maintenance, vehicle taxation and potential additional charges.

Affordability should be assessed against the full agreement rather than the advertised monthly figure alone.

5. How Could Depreciation Affect the Cost?

A purchased vehicle's eventual resale value may be higher or lower than expected.

Under standard contract hire, the finance provider generally bears the direct resale-value risk, subject to the customer's contractual obligations.

10. Frequently Asked Questions: Car Leasing vs Buying

Is Leasing a Car a Waste of Money?

Not necessarily.

Leasing provides the use of a vehicle for an agreed period without ownership.

Whether it offers good value depends on the total cost, agreement terms and the customer's requirements.

Is It Cheaper to Lease or Buy a Car in 2027?

There is no universal answer.

Leasing can be competitive over shorter periods, while buying may offer better value over longer ownership periods.

The outcome depends on actual prices, finance terms, running costs and eventual resale values.

Is Leasing Cheaper Per Month Than Buying?

It can be, particularly compared with some purchase finance arrangements.

However, a lower monthly payment does not automatically mean a lower overall cost.

What Happens at the End of a Car Lease?

At the end of a standard Personal Contract Hire agreement, the vehicle is normally returned to the finance provider.

The vehicle may be inspected for mileage, condition, missing equipment and compliance with the applicable return standards.

Charges may apply for excess mileage or damage beyond the agreed fair wear and tear standards.

For more information, see the BVRLA's vehicle return guidance.

Can I Buy My Leased Car at the End?

Standard Personal Contract Hire does not normally include an option to purchase.

Purchase finance arrangements, including PCP and HP, have different ownership provisions.

Read our PCP Explained guide.

Is Leasing Better If I Drive Fewer Miles?

Lower annual mileage can sometimes reduce rental costs.

However, the overall comparison depends on the vehicle, contract terms and total financial commitment.

Is Buying a Used Car Cheaper Than Leasing a New One?

It can be considerably cheaper, particularly if a reliable used vehicle is purchased and kept for several years.

However, maintenance, repairs, warranty cover and resale value can affect the overall cost.

What Should First-Time Drivers Consider?

First-time drivers may wish to compare insurance costs, affordability, expected mileage and ownership preferences.

An affordable used vehicle may provide a lower-cost alternative to leasing a new car, depending on the circumstances.

Can I End a Car Lease Early?

Early termination may be possible under the relevant finance agreement, but substantial charges may apply.

The applicable terms, charges and procedures depend on the finance provider, the agreement and relevant law.

Cancellation of Applied Leasing's brokerage services is separate from early termination of a vehicle finance agreement. Different charges and rights may apply.

For further information, please see our Terms and Conditions and Information Notice.

Does Leasing Include Servicing and Maintenance?

Not automatically.

Servicing, maintenance and tyres are generally separate unless a maintenance package or other service is included in the agreement.

Any additional package may affect the overall rental cost.

Can I Lease a Car Through My Business?

Business Contract Hire is available for eligible businesses and involves different contractual and potentially tax considerations from Personal Contract Hire.

For more information, read our Business Contract Hire guide.

11. Summary: Is Car Leasing or Buying Cheaper in 2027?

Neither leasing nor buying is automatically the cheaper option.

Personal Contract Hire can provide predictable scheduled rentals and access to a newer vehicle without ownership. However, mileage limits, return conditions and potential early termination charges apply.

Buying offers the possibility of long-term ownership and future resale proceeds, but involves depreciation, maintenance responsibilities and potentially finance interest or other charges.

The overall cost depends on:

• Initial payments and monthly commitments.

• Finance interest and fees.

• Depreciation and estimated resale value.

• Insurance, servicing and maintenance.

• Vehicle Excise Duty (VED), including any applicable increases, and other running costs.

• Mileage allowances and potential additional charges.

• The intended period of ownership or use.

This guide explains the differences between leasing and buying. It does not recommend a particular financial product or determine which arrangement is suitable for an individual's circumstances.

12. Explore Car Leasing with Applied Leasing

Applied Leasing is a family-run UK vehicle leasing broker established in 1990.

We help individuals and businesses explore available personal and business vehicle leasing options.

Whether you're comparing leasing with buying, researching vehicle costs or looking at available offers, our team can provide information about leasing contracts, vehicle availability and the relevant charges.

Explore Your Options

• Personal Contract Hire

• Business Contract Hire

• Personal Contract Purchase Explained

• Latest Vehicle Leasing Offers

• In-Stock Vehicles

• Car Leasing FAQs

• Contact Applied Leasing

Thinking about leasing your next vehicle? Explore our current offers or contact Applied Leasing for information about available vehicles, rental structures and contract terms.

Official Guidance and Further Reading

For additional independent information about vehicle finance and leasing, the following resources may be useful:

• MoneyHelper – Personal Contract Hire Explained

• MoneyHelper – Personal Contract Purchase Explained

• MoneyHelper – Hire Purchase Explained

• BVRLA – Returning Your Leased Vehicle

Important Information

This article is provided for general information only and does not constitute personalised financial, tax or legal advice.

All financial examples are hypothetical and do not represent current quotations, guaranteed savings or verified future resale values. Actual costs, finance terms, administration fees and resale values may vary.

Applied Leasing Limited is a credit broker, not a lender. We work with a selected panel of finance providers and do not search the whole market. We may receive commission or other benefits from finance providers or other parties in connection with arrangements we introduce. Further information is available in our Commission Disclosure Policy.

Applied Leasing Limited is an Appointed Representative of Jurni Limited, which is authorised and regulated by the Financial Conduct Authority for credit broking activities.

Finance is subject to status, eligibility and the applicable terms and conditions.

Article date: 10 November 2026.