While we all love owning our own vehicle, often a lack of immediately available funds means this simply isn’t possible. In this scenario, we generally have one of two options: either rent or get a finance lease, or we choose the most burned-out little clapper we can find on eBay… which then breaks two weeks later.

Obviously, in this scenario, most of us would rather rent a nice car than own one that will cost hundreds in MOTs and services and be quite embarrassing to drive (there comes a time when fancy and dilapidated is less charming and more sad….) . But still, once you’ve made that decision, do you choose a commercial auto loan or a finance lease? The difference between the two is significant and will make a world of difference to your own finances and the best option will largely depend on your circumstances.

Essentially, a commercial auto loan is exactly what it sounds like, and you’ll simply pay a monthly fee to keep the vehicle. This fee can be significant and usually around 3-10% of the car’s value (depending on the car and company), which will quickly add up to a significant amount, and within a few months you’ll most likely have bought a more old but perfectly serviceable because yourself. Plus, you won’t have anything to sell once your contract is up, which means you’ll lose all that money. If you own a car, on the other hand, you will be able to sell it. Granted, this will be for a fraction of the price you paid, but we’ll still give you your money back on your investment. In this sense, the commercial car loan is not a great investment.

However, before you make a decision, consider some of the benefits of a commercial auto loan. While you’ll pay a certain fraction of the car’s value, things you won’t pay include taxes, MOT, repairs, or insurance (insurance will often be included in the monthly payment at a lower rate). In this way, the price you pay per month suddenly drops to a much lower percentage of what you would pay for a car in total. In this sense, if you are on a tight budget, you will be much better off with a car loan. Likewise, if you only need the car for a couple of months, it again makes more sense than buying a small, old car, paying the taxes and insurance, and then selling it so soon after.

However, the leasing option caters to a completely different market. This is for people who want to buy a car that is just outside of their current budget and therefore gives them the option of paying their money back within a set period of time. This obviously means that they will pay a little more in interest, however it also means that they can afford a slightly better vehicle than they might otherwise. In all other respects the car is theirs; They will have to pay insurance and taxes as usual, but it will still be yours to sell in the end. To answer the original question posed in the title, car rental is better as a short-term budget option, while leasing is better for those who want to invest in a slightly better vehicle than they can currently afford. .