Leasing vs Buying a Car in 2026: The Real UK Cost Comparison

Quick answer

There is no single winner. Leasing and buying solve different problems.

• Lease if you want a fixed, predictable monthly cost, like changing car every two to four years, and would rather not deal with selling a depreciating asset.
• Buy (cash or finance) if you keep cars for many years, drive high or unpredictable mileage, or want to end up owning something rather than handing the keys back.

The mistake most people make is comparing only the monthly figure. A £279/month lease and a £279/month PCP are not the same deal — one ends with nothing, the other ends with a choice and a balloon payment. To compare properly you need to look at the total amount you pay over the time you actually keep the car.

The three ways to get a car in 2026

Personal Contract Hire (PCH) — leasing

You pay an initial rental (often three, six or nine months' worth upfront), then fixed monthly payments for a set term, usually two to four years. At the end you hand the car back. You never own it. The price is built around the car's expected depreciation over the term plus interest and the lease company's margin.

Personal Contract Purchase (PCP)

A finance product where your monthly payments cover the depreciation during the term, not the full value. At the end you have three choices: pay the balloon payment (the Guaranteed Future Value) to own the car, hand it back, or use any equity as a deposit on the next PCP. Monthly costs are lower than a loan because you are not paying off the whole car — but the balloon can easily be £8,000-£15,000 on a mid-range car.

Hire Purchase (HP) or a personal loan — buying on finance

You borrow the full value of the car and repay it in fixed instalments. With HP the car is security for the loan and becomes yours with the final payment; with an unsecured personal loan you own it from day one. Monthly payments are higher than PCP or PCH because you are clearing the entire balance, but at the end you own the car outright.

Cash — buying outright

No interest, no contract, no mileage limits. The car is yours immediately. The downside is the large lump sum and the fact that you carry all the depreciation yourself.

Depreciation: the cost that drives everything

Depreciation is the largest single cost of running most cars — far bigger than fuel, insurance or servicing for the first few years. A typical new car loses roughly 15-35% of its value in year one and is often worth only 40-60% of its list price after three years.

This matters because every option above is really a way of paying for depreciation:

• When you lease, the lease company predicts the depreciation and charges you for it. If used values crash, that is their problem, not yours.
• When you buy, you absorb the depreciation directly. If the car holds value well you win; if it tanks, you lose.

So leasing is partly an insurance policy against depreciation risk. That is genuinely valuable for fast-depreciating cars (and was painfully relevant for some used EVs in 2023-2024). For a slow-depreciating model bought used, buying is usually the cheaper bet.

A worked comparison

Take a popular family car with a list price of around £30,000 and assume you keep it for four years at 10,000 miles a year. Illustrative figures (real quotes vary by deal, deposit and credit):

Read across carefully. The lease has the lowest commitment and the cleanest exit, but after four years you have nothing and start again. The buyer on HP paid the most each month, but now owns a car worth maybe £15,000 with no further payments. If they keep driving it for another four or five years, their cost per year falls dramatically while the leaser keeps paying ~£300+ a month forever.

This is the heart of the decision: leasing optimises for the short term and predictability; buying optimises for the long term and total cost.

Use the car finance calculator to plug in real quotes for PCP and HP side by side and compare the total amount payable, not just the monthly headline.

The mileage trap

Every lease and PCP comes with an annual mileage limit. Quotes look cheaper at low mileage, which tempts people to underestimate. Go over and you pay excess mileage charges, typically around 5p to 30p per mile depending on the car.

A 5,000-mile overrun at 15p per mile is £750. On a premium car at 25p-30p a mile it can run well past £1,000. If your mileage is high or unpredictable — long commutes, frequent motorway trips, a job that involves driving — ownership starts to look much better because you are not penalised for using the car you are paying for.

Be honest about your real annual mileage before you sign. It is cheaper to pay slightly more per month for a higher limit than to be stung at the end.

Total cost of ownership, not just the monthly figure

The monthly payment is only part of motoring cost. Whichever route you choose, budget for:

• Insurance — premiums rose sharply through 2024-2025; get quotes before you commit to a specific car.
• Servicing and tyres — often included or discounted on leases, paid by you when buying.
• Vehicle Excise Duty (road tax) — payable on owned cars; usually bundled into lease costs.
• Fuel or charging — frequently the biggest ongoing cost after depreciation.

The car running cost calculator helps you total these up, and the fuel cost calculator estimates what your annual mileage will actually cost to fuel or charge. A cheap-to-lease car that drinks fuel can easily cost more overall than a slightly dearer car that sips it.

Who each option actually suits

Lease (PCH) suits you if:

• You like a new car every two to four years and want fixed, predictable costs.
• Your annual mileage is stable and you can size the limit accurately.
• You do not want the hassle of selling a car or carrying depreciation risk.
• You can commit to the full term — early exit fees are steep.

PCP suits you if:

• You want lower monthly payments than a loan but might want the option to keep the car.
• You are comfortable with a large balloon payment decision at the end.
• You value flexibility to roll equity into the next car.

Buying (cash or HP/loan) suits you if:

• You keep cars for many years — this is where buying decisively wins on total cost.
• You drive high or unpredictable mileage and hate mileage limits.
• You want to own an asset and eventually live with no monthly car payment at all.
• You can buy a two-to-three-year-old used car, letting someone else absorb the steepest depreciation.

The often-overlooked middle path: buy used

For most drivers the cheapest motoring of all is buying a two-to-three-year-old used car with cash or a small loan and keeping it. By that age the car has already taken the steepest part of the depreciation curve while keeping years of useful life and often some warranty. You avoid both the new-car depreciation hit and the never-ending lease payment. It is not glamorous, but the numbers are hard to beat.

A note on company cars and salary sacrifice

Everything above is about personal leasing and buying. If your employer offers a car through salary sacrifice — especially an electric vehicle — the tax treatment changes the maths entirely, because you pay from gross salary and the Benefit-in-Kind tax on EVs remains low (though scheduled to rise over coming years). That can make an EV via salary sacrifice cheaper than any personal lease or purchase, despite the headline price. If that is on the table, model your take-home both ways with the take-home pay calculator before deciding, and treat it as a separate comparison from the personal options here.

Bottom line

Leasing buys you predictability and frees you from depreciation and resale hassle, but you own nothing and you are tied to mileage limits and the full term. Buying — particularly a sensible used car kept for years — wins on total cost and flexibility, at the price of carrying the depreciation yourself.

Decide first how long you realistically keep cars and how many miles you drive. Short hold and stable mileage point to leasing; long hold or high mileage point to buying. Then compare the total you will pay over that period, not the monthly figure the salesperson leads with.