How to Get the Best Car Deal in 2025: Buy, Finance, or Lease? #carbuyingguide

Matt | Personal Finance

Confused about whether to buy, finance, or lease a car in 2025? You're not alone! This video breaks down all the key factors you need to know to make the best financial decision when purchasing your next vehicle. From comparing outright buying, financing (hire purchase and PCP), to leasing, I look into the pros and cons of each option, providing clear insights into what's best for your budget and lifestyle.   #carfinance #carleasing #buyvslease #financingacar #carfinance2025 #vehicleoptions #moneytips #carbuyingguide #carownership

Transcript

00:00if you're in the market for a car you're probably asking yourself whether buying

00:03financing or leasing is the best financial option in this video i'll cover the four main ways to

00:09purchase a car evaluate what the cheapest option is and discuss some of the other factors that

00:14you'll want to consider when making your decision if you're new to this channel i'm matt i've been

00:19a finance consultant for over 10 years i now run my own company and on this channel i talk all

00:24things personal finance so let's start with what the four main options are to buy a car first is to

00:30buy the car outright and to pay the full cost at the start with this option you don't have to make

00:35any ongoing payments to own the car the second is finance or higher purchase which is where you pay

00:41a deposit and then borrow the outstanding amount at a set interest rate which you pay back in monthly

00:46installments over an agreed period of time and at the end of the financing period you then own the car

00:52the third option is to lease the car which is like renting where you make monthly payments and then

00:57at the end of the contract you give the car back in the finance higher purchase option you're paying

01:02the full value of the car as you get to own it at the end whereas in the lease option you're only

01:07paying part of the value of the car and then giving it back the fourth option is something called pcp

01:13with this option you set a term and the time period for the agreement you pay a deposit and then the

01:18company provides the final value for the car and what it will be worth at the end of the agreement

01:23these are then subtracted from the cost of the car to work out how much the loan will be and how much

01:28you'll be paying on a monthly basis at the end of the agreement you have a few options you can decide

01:34to keep the car and pay the final value you could return the car or you can use the final value to pie

01:40exchange the car the question on which option is the best is a difficult one and you may be struggling

01:45to decide what to go for you may think that buying a car with cash up front is the best option as you

01:51get full ownership without having to pay interest on finance like in the other options but on the

01:56other side you may think that leasing or financing is a better option as you don't have to pay the

02:01total cost up front and instead you pay a monthly fee to try to help you with some of the things to

02:06consider when making your decision i've done analysis on an example which i'll go through now

02:12so to compare apples with apples i've based this on an average medium-sized family car and i've

02:17picked the bmw 120 sport which on the bmw website is priced at 31 065 pounds for each of the options to

02:26make it as light for like as possible i've based the example on having the car over a four year or 48

02:32month time period on doing the average annual mileage in the uk which is around 8 000 miles per year

02:39and putting down a 4 500 pound deposit or initial rental payment depending on which option we're

02:45looking at the deposit amount is just below 15 of the car value option one is to lease the car the

02:52upfront initial rent payment is 4 500 pounds and then this is followed by 47 monthly payments of 318

03:00pounds and 64 pence which equals just under 15 000 pounds in this option you don't have the purchase price

03:07or resale value to consider as you just give back the car at the end of the agreement so the total cost

03:13for the lease option is 4 500 pounds plus 14 976 pounds which equals a total cost of just under 19 500

03:25option two is pcp the initial rent payment is again 4 500 pounds and the monthly payments are 327 pounds and

03:3476 pence for 47 months which equals a little over 15 000 pounds to make it comparable to the lease

03:42option i've assumed that the car is given back at the end of the pcp agreement rather than purchased

03:48so that means that the total cost is 4 500 pounds plus 15 358 pounds equaling just under 20 000 pounds so

03:58higher than the lease option option option three is finance or higher purchase based on a deposit of

04:044 500 pounds the monthly payments are 609 pounds for 48 months meaning total payments of just over 29 000

04:13pounds and after paying this you then have full ownership of the car the monthly payments are far

04:18higher than the lease and pcp options because of the way it's calculated as these are based on the value

04:24of a portion of the car whereas the finance higher purchase option is based on paying for the full

04:29car the total cost for the finance higher purchase option is 33 746 pounds with the extra money over

04:37the car value of 31 065 pounds due to the interest paid on financing for this option to make the total

04:45cost comparable to the lease and pcp options let's say we then decide to sell the car at the end of the

04:51agreement the resale value based on the average depreciation curve for a car means that after four

04:57years the car will be valued at 15 243 pounds so if i were able to sell the car for that much the total

05:05cost of having the car for four years would be 4 500 pounds plus 29 246 pounds minus 15 243 pounds which

05:16equals just over 18 and a half thousand pounds so based on this example calculation it comes out as

05:23the lowest cost option of the three financing options but it is dependent on the resale value

05:28achieved the final option we're looking at is option four and that is to purchase the car outright at the

05:34start to calculate a comparable cost over a four-year period it will be to take the purchase price minus the

05:41resale value which equals a total cost of 15 822 pounds buying the car outright comes out as the

05:49lowest total cost option however an important thing to consider is the opportunity cost if you put down

05:5531 000 pounds from the start it's locked up in the car the alternative is paying 4 500 pounds in the

06:02financing options and using the leftover money from the 31 000 pounds to invest in the stock market or

06:08another wealth generating asset the question is whether you can make better returns from investing

06:13versus the additional cost in the financing options pcp comes out as the most expensive option and is

06:19often the one the car dealerships will try to push as they make the most money from it and it also

06:24typically ties you in for longer as at the end of the contract you may upgrade your car or do a power

06:29exchange and enter into a new agreement there are a few different factors which influence what the lowest

06:35cost option is for example how much money you're willing to put down as a deposit what the current

06:40interest rates on financing and the length of time that you plan to have the car and the future resale

06:45value let's go through some of these variables to show how changing them can impact the financial

06:50outcome if the resale value is higher then it's better to own the car ie to purchase outright or the

06:56higher purchase option but if the resale value is lower then leasing becomes more financially attractive

07:02another variable is interest rates if these are lower then one of the finance options could be

07:07better to do rather than buying the car outright as the cost of loaning money for the car is less

07:13and the opportunity cost is higher from not having the money to invest whereas if the interest rate is

07:18high on the finance options then putting down a larger deposit or buying the car outright will mean

07:23larger savings over the lifetime of the agreement it's a good idea to model the cost for the different

07:29options based on your own personal circumstances so when making your decision on the best option

07:34there are a number of different financial and non-financial factors to consider with leasing or

07:39the pcp option one of the pros is that it gives you flexibility you're able to switch or upgrade your car

07:45after a few years and you don't have the hassle of having to sell your car and if you're looking to get

07:51a more expensive car which can have high depreciation values then it can make more financial sense to lease

07:57rather than buy and often maintenance issues are covered by the dealer under lease agreements but

08:02check your contract on this one of the cons of leasing is that you need to keep your car in perfect

08:07condition otherwise you get charged when you return it to the dealer and there are restrictions with these

08:12options as the car is not yours to keep for example there can be restrictions on the amount of mileage

08:17that you can do and if you exceed the threshold then you have to pay more with the finance higher purchase

08:23option some of the pros are that you can own a car with limited upfront costs once you've paid off the

08:28car you don't have the stress of the ongoing regular payments and you have full ownership so

08:33you don't have the restrictions associated with leasing however the con of financing is that interest

08:39payments can be high which can take up a large chunk of your disposable income each month making it

08:44difficult to save anything on top you also have maintenance costs associated with ownership which tend to

08:50increase as the car gets older the final option buying the car outright has the benefits of giving

08:56you peace of mind you own the car fully and you don't have the restrictions or the stress of making

09:01regular monthly payments after you've purchased it this option can work well for people who don't

09:06mind driving the same car for five eight or over ten years however as i've said before the main con of

09:13buying a car outright is needing to pay large amounts of money up front and the opportunity cost of using that

09:20money to invest as well as this cars are in general a depreciating asset unless you really know your stuff

09:26and have something like a rare vintage car one way to try to mitigate this is to buy a second hand car

09:33which is already part way down the depreciation curve at someone else's expense one thing to note is that

09:39this video focuses on the comparison of the cost of purchasing a car when budgeting for a car you'll also

09:45need to factor in other costs such as car insurance fuel costs routine maintenance road tax mot and parking

09:52costs so hopefully the analysis and summary in this video has been helpful in providing some of the key

09:58things to consider when buying a car feel free to leave any comments give the video a like and subscribe to

10:04my channel i'll see you on the next video

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