Buy or lease – what's really worth it?

Private leasing is easy, convenient and popular. But simplicity comes at a price. For many, it's smarter to buy a used car, as the biggest depreciation has already been taken by someone else.

As a private individual, there are mainly two ways to finance a new car: buying or leasing. Buying is the traditional option. Usually, the purchase is financed with a car loan, where you pay a cash deposit and then amortize as the car depreciates.

As a rule of thumb, a car is worth between 70 and 80 percent of its new price after one year, 60–70 percent after two years, and 50–60 percent after three years.

– The drop in value is therefore greatest at the beginning. When the loan expires, you can either extend it, sell the car and pay off the debt, or pay off the debt and keep the car, explains Karl Wahlin, analyst at Bilpriser.se .

Private leasing began to gain momentum at the turn of the millennium but really took off in the 2010s. The driving force was a new view of car ownership, where consumers preferred a fixed monthly cost over tying up capital in the car. With private leasing, you get access to a new car without a cash deposit. Over the years, private leasing has become one of the most common ways to acquire a car in Sweden.

Why private leasing can be more expensive than you think

On paper, the monthly leasing cost may seem low, but over the entire period you pay a significant portion of the car's total value. Lease agreements can rarely be terminated early. The cost of private leasing can therefore be seen as effectively paying the full amount from the start.

– And here come the disadvantages of private leasing. Because you can be sure that your life situation will be the same during these years, or that your conditions and needs will not change, says Karl Wahlin.

Interest rate increases can mean that the monthly cost increases. Mileage is also limited and excess miles are expensive. If you drive too little, you have still paid for miles that were not used, and what counts as normal wear and tear can become a matter of discussion when you return the car.

Cost over time

If you buy the car, you have the freedom to sell it whenever you want, while private leasing provides security and predictability. But the smell of a new car is expensive, says Karl Wahlin. From an economic point of view, neither buying a new car nor private leasing is the most advantageous. Anyone who wants the most car for their money is wisest to choose a used car. Then the greatest drop in value has already occurred and reason and economy are combined in car ownership.