Car Loan vs Car Lease In NZ: Choosing The Best Option

What's the difference between a car loan, and a car lease? Which one would actually benefit you in the long run? There's always more than meets the eye, so we're diving deep into these options to help you come up with the best choice.

When getting an auto loan, you usually have two options: leasing a car, or actually buying one.

Car leasing is often much cheaper in the short term and remains a viable option for those who find it too daunting to save up to buy a car. Under a car lease, one party permits you to drive a vehicle for a specified period of time in exchange for periodic payments. Usually, these contracts also give you the option to purchase the car at the end of the contract period. Otherwise, you simply turn it back to the lessor.

How to determine whether to lease or buy a car?

While car lessors may offer you an option to purchase the vehicle you’ve been driving, this isn’t exactly a guarantee. On the other hand, purchasing the car is a lot more straightforward. You pay for it, and you own it. Aside from that, there’s other differences when it comes to payment structures, model availability, and warranties.

Ownership

Buying a car holds an advantage in this regard. When you own a car, you typically have a lot more freedom. You can customize its components, change parts like wheels, or even add some personal touches like decals if you want. You don’t get this level of freedom with a leased car. You may get approval from your lessor to do so but this is another step that isn’t present with a car you bought. Most modifications allowed with a leased car is temporary. They must be removed before you return the car in the end. It may even void the car’s warranty.

There are some unique advantages with car leasing though. If you only need a vehicle for a couple of years or so, then leasing may become the more cost-efficient option. You can simply return it to your lessor once you’re done. Additionally, it may be possible to lease a car that is more expensive and nicer than one they can buy to own via their own financing.

Payment

Car leasing is typically cheaper than the monthly payments you would be making should you try buying the same vehicle via car financing. This is because the payments made for a leased vehicle is based on the depreciation value of the car over the course of the leasing period, making leasing cheaper in the short term.

On the other hand, buying a car to own is generally less expensive. Rather than needing to renew your car leasing after the end of every period, you get to keep the car once it’s been fully paid off, leaving you free to use it for as long as the vehicle lasts.

Read: The Ultimate Guide To Mechanical Breakdown Insurance in New Zealand (MBI)

Warranties

Leased vehicles typically remain under warranty throughout the lease period, so you only have to worry about routine maintenance. The warranty should cover mechanical failures for as long as you lease the vehicle.

On the other hand, a car you bought may be covered by a warranty for a short period of time. You’ll have to extend the warranty or get cover like mechanical breakdown insurance to account for possible future mechanical damages.

Should I buy a vehicle or lease it?

This depends on your needs. Leasing a car is cheaper in the short term and it does offer its own perks, but you may end up paying so much over a certain period that it would be more practical to loan a car. Leases typically come with a number of fees and penalties such as downpayment, securities, and license fees.

On the other hand, buying a car can be much more expensive in the short term as you’ll have to fork out the money needed to buy it. Otherwise, you might have to get a car loan from a trusted financier. Once you need to change a vehicle or finally let go of it, you’ll be responsible for finding a buyer for your vehicle.

Where to lease cars in NZ?

First, you can look at certain car brands to see if they have vehicles available for you to lease. For example, Honda and Toyota offer leasing options, with Toyota even offering leases on boats and marine vehicles. Other providers include:

Maxxia

Maxxia offers the option to lease an entire fleet of vehicles for small-to-medium enterprises (SMEs) and large corporations. This allows them to expand their assets for their operations without having to shell out a huge sum to purchase their own vehicles. Some options offered by Maxxia not only covers the lease but also maintenance, servicing, and fleet management. Check out their website here.

Driveline

Driveline is specialist car finance and car lease for Auckland, Wellington, and Christchurch area. You can lease a variety of vehicles such as small cars, SUVs, Utes, and even EVs and Hybrids. You can check out their full selection on their webpage here.

Read: Top 5 Car Insurance Providers In Auckland

Flexilease

Flexilease specialises in providing great quality new and near-new vehicles for lease. Their car lease in Christchurch and across NZ is easily available for individuals and businesses. Flexilease takes the time to ensure that you’re able to receive a leased vehicle that works well within your preferred specifications and budget. They can even provide fleet leasing, too. Check out the details here.

Where to find ex-lease cars for sale in NZ?

Of course, there’s also the possibility of buying a car that was used for leasing purposes, either on its own or as part of a fleet. Most of the time, you can get these cars at auction so you can start your search there. Of course, you'll need due diligence and thorough research beforehand to really get the best value for your money. 

First of all, it’s always recommended that the car in question gets a pre-purchase inspection by a professional, same as when you’re buying a used vehicle. This allows you to get a good idea of the car’s condition before you shell out the money for it. Remember other things like doing a visual check and asking when its Warrant-of-Fitness (WoF) is due.

Most drivers tend to be quite careful while driving a leased car as it’s a requirement. So it’s possible to get a good, well-maintained vehicle by going through ex-lease cars for sale in NZ. Most of the time, lessors do have some rules in place such as bans on smoking while driving.

On the other hand, if the car was part of fleet operations, the previous driver may have chosen against following a typical servicing schedule, requiring further investigation in order to find any more hidden troubles. It’s also possible that an operator may replace their entire fleet at the same time, leading to a good number of identical vehicles being put up right next to each other.

Lastly, keep your eyes peeled for added bonuses when looking for an ex-lease car. For example, if you need a vehicle with a custom cargo barrier, you can start looking for an ex-lease that already has one installed without dramatically increasing the price. You can always get these modifications done yourself but it’s probably going to cost you a lot more.

Read: The Most Reliable Cars Of 2021

Final Thoughts on Car Leasing

Not all leased cars for sale may turn out to be hidden gems and car leasing itself isn’t always a cost-efficient solution, especially if you’re looking for a more permanent means of transportation. However, it can be a good option to keep in mind depending on certain circumstances such as only needing a vehicle for a short amount of time. There’s also the added benefit of buying a car that was once used for leasing operations, where it remains in good condition while having all the bonuses you need.

As always, you’ll need to go with an option that best suits your needs and finances while doing all the due diligence required to ensure you don’t get saddled with a car that you don't want.

Use glimp's FREE car loans calculator to get an estimate on how much you're going to pay for your new car.