Leasing vs Buying a Used Car: Which Is Cheaper in the UK?

The monthly payment on a lease looks attractive, but is it actually cheaper than buying a used car? To answer this properly, you need to compare the total cost of each option over the same period, including all the costs that are easy to overlook.

We have built two worked examples comparing a leased new Volkswagen Golf against a 3-year-old used Golf over the same 3-year period.

The Comparison: New Golf Lease vs Used Golf Purchase

Figures are illustrative and based on typical 2026 costs for a VW Golf 1.5 TSI. Lease includes maintenance package. Used car assumed bought outright with no finance. Your figures will vary.

The Verdict: Buying Used Is Usually Cheaper

In our worked example, buying a 3-year-old used Golf costs around £5,800 less over 3 years than leasing a new one. This is primarily because:

• Depreciation slows dramatically after 3 years. A new car loses the most value in its first 3 years. By buying a 3-year-old car, you let someone else absorb that initial depreciation
• Lease payments include profit margin. The leasing company needs to make a return, which is built into your monthly payments
• You build equity when you buy. At the end of 3 years, you have a car worth £10,500 that you can sell. With a lease, you have nothing

When Leasing Can Make Sense

Despite being more expensive on paper, leasing has genuine advantages for certain drivers:

• You do not have the capital to buy outright. If you would need to finance a used car purchase, the interest charges narrow the gap significantly
• You want a brand-new car with full warranty. Peace of mind has real value, especially if you have been burned by reliability issues on used cars
• You value predictable costs. With a maintenance-inclusive PCH, your only variables are insurance and fuel
• You want an electric car. EVs depreciate unpredictably, so leasing removes that risk entirely
• Business tax benefits. For company cars or sole traders, the VAT recovery and tax deductions can make leasing significantly cheaper

What About Opportunity Cost?

If you have £16,000 to buy a car outright, that money could alternatively be invested. At a modest 4% annual return, £16,000 invested for 3 years would grow to roughly £18,000 — a £2,000 gain. This is an additional cost of buying with cash that is often overlooked.

However, the savings from buying used (£5,800 in our example) still exceed this opportunity cost, making buying used the cheaper option even after accounting for investment returns.

The Break-Even Point

Leasing becomes competitive with buying used when:

• The used car requires expensive repairs (a risk that increases with age and mileage)
• You finance the used car at a high interest rate (above 8–9% APR)
• The used car depreciates faster than expected (some models lose value more rapidly)
• You factor in the value of your time spent maintaining and selling a used car

Final Thoughts

For most UK drivers, buying a 2–3 year old used car and keeping it for 3 years is cheaper than leasing new. However, leasing offers convenience, predictability, and access to the latest models that some drivers value highly. The best choice depends on your financial situation, your attitude to risk, and how much you value driving a brand-new car.