Leasing has become the new trend among car owners. Though the debate remains on which is better and which is more beneficial, there is no denying that the number of vehicles leased increases day by day, especially in markets like USA, AUS and the UK. That being said, hire purchasing has not run out of its popularity as well, though in countries mentioned above, hire purchasing is not favored as the payments come with higher interests ranging from 3% to 15%. So, which is better for civilians? Leasing or hire purchasing are not decisions made with the first speculation. It needs a thorough understanding and in-depth analysis so that the choice made best suits the everyday life of the person. At MyMotor, we engage in both hire purchasing and leasing so we can give you a clearer picture of how both of this works and leave you to make the best decision that fits your budget.
HIRE PURCHASE (HP)
In simple words, this is the loans we request to banks or financial institutions with payment duration reaching up seven to nine years. There’s, of course, interest rates that vary from bank to bank. Even at MyMotor, there’s no fixed interest rate provided. The interest rates are affected by various factors from the car’s latest market value and the amount of loan applied for.
This is temporary car ownership provided by the primary owner (exp: MyMotor) for a certain period of time. To make it more understandable, think of it like renting rooms. A certain amount of security deposit is paid before renting it out for a year or two with fixed monthly payments and once the contract is up, you’ll get your deposit and be on your way. The same goes for leasing a car. At MyMotor, there are two ways this could be done. Either 3 months’ refundable advance deposit need to be made (which at the end of the lease it will be fully refunded) or 10% of the value of the car’s body price made as a non-refundable deposit (this will also help in reducing the monthly commitment).
In the means of which is better, we have to say there are pros and cons for both.
OWNERSHIP OF THE ASSET
HP: you’ll be the owner of the vehicle, though a long period of payment is there, in the end of the seventh or ninth year, the car will be yours.
LEASING: as for leasing, you can never be the primary owner of the vehicle but there are few alternative things you could try with leasing. For example, at MyMotor, once your leasing is up, you could return the car and lease up a brand-new car or you could buy the car at current market value. You could also just return the car and end the contract.
HP: the payments made under hire purchases are generally higher (also taking in interest rate as a factor) and for a longer period of time (mostly seven to nine years).
LEASING: since you would not be the primary owner of the car, generally the payments are lesser than hire purchases and for a short period of time (at MyMotor, we lease for three or five years maximum)
REPAIRS AND MAINTENANCE
HP: this is to be borne by the purchaser.
LEASING: this are not borne by leaser, it will be carried by the primary owner for the rest of the leasing period. In fact, at MyMotor, for the duration of the contract, you would not have to worry payments for road tax, maintenance, and insurance as it will be borne by us.
SO, WHAT WILL BE THE BETTER CHOICE?
Honestly, it all depends on the person and their financial capability.
Hire purchasing may be a long process of payments with slight higher amount than leasing, but at the end of the loan payment, that car will be yours truly. Plus, there’s no second party to answer to if something were to happen to your vehicle. You’re the boss of that ride.
Leasing may appear as an out-of-the-norm way of owning a ride, but rest assure, this is one of the least stressful ways for you to have a car. It saves a lot of your money from monthly payments to maintenance, yet gives you the pleasure of driving the car of your dream nonetheless. Moreover, most users change their cars after four or five years. By leasing, you will have the luxury of changing to a brand-new car without the stress of loans and down payments. It is for those who do not want a long-term commitment maintaining an older car.
So, it all depends on what type of commitment you’re looking for, or capable of. If you’re a long-term user of the same car then hire purchasing would seem relevant. But if you’re a trend seeker and prefer to change car every five years or so, then leasing would seem right for you.
If you have more questions regarding leasing and hire purchasing, or if you would like to get assistance in purchasing a car, please call our MyMotor at 03-7664 8500 or drop us your questions at our online customer service at www.mymotor.my.