The depreciation gap: Leasing vs buying a car in the UK

Written by Ben Wileman from Select Car East Midlands

Ask a driver what their car costs and you will hear about fuel, insurance, maybe the last service bill. Almost nobody says depreciation. Which is strange, because it is the biggest number by a wide margin. Value drains out of a new car while it sits on the drive doing nothing at all, and three years later a serious chunk of what you paid has simply gone. That is the whole case for leasing vs buying a car. Lease it, and somebody else eats the loss. The question worth asking is not which option wins in general. It is which cars have a gap wide enough to settle the argument for you.

Depreciation is the bill you never see

A new car in the UK usually loses somewhere between 40 per cent and 55 per cent of its value over three years. Roughly a quarter of that goes in the first twelve months. On a £30,000 car that is about £7,500 evaporating before you have bought a tank of fuel, and if you divide the three year total by 36, mainstream car depreciation lands somewhere around £350 to £450 a month for an ordinary family hatchback.

Look at that figure again. It is more or less what a competitive lease rental costs on the same vehicle.

This is the bit people miss when they weigh up leasing vs buying a car. The lease payment shows up on your bank statement every month, which makes it feel expensive. Depreciation never shows up anywhere. It works quietly in the background and presents the bill once, on the day you try to sell, by which point there is nothing you can do about it.

What makes the comparison worth running properly is the spread. Three year retention across the UK market goes from under 30 per cent at the grim end to north of 65 per cent at the good end. That is not a rounding error. It is the difference between a car costing you £600 a month and one costing £200 for the privilege of ownership. So averages are close to useless here, and the badge on the bonnet decides more than most buyers realise.

Where the gap gets ugly

Some cars treat their owners badly. Below are the segments where the maths tilts hardest toward a lease, using current UK residual data.

The GWM Ora 03 keeps 25.8 per cent of its value after three years. A £31,995 car, worth around £8,250. Early EVs from Nissan, Renault and BMW are not far behind.

Luxury flagships are brutal in cash terms. The Mercedes-Benz SL Maybach 680 drops £159,175 in three years from a £241,350 list price, which is the steepest fall in the UK top twenty and comfortably more than any rental you could sign.

Large executive saloons have been quietly abandoned by the used market. Buyers went to SUVs and never came back.

Anything heavily bought by rental fleets suffers when those cars hit the market together three years later. You did not cause the oversupply but you paid for it.

Base spec cars with no options. Lists of the fastest depreciating cars are full of them, because a plain car appeals to almost nobody second hand.

The thread running through all of it is thin. Fast moving technology, oversupply, shifting taste. When those hit at once, car depreciation on the model overtakes what the equivalent lease would have cost, sometimes by a lot.

Where buying still wins

It would be dishonest to pretend leasing wins across the board, and any leasing company telling you otherwise is selling rather than advising.

Sensible, cheap, practical cars are the obvious exception. The Dacia Bigster holds roughly 66.2 per cent of its value after three years and 36,000 miles, so a £29,990 car is still worth about £19,850. Small hatchbacks like the Hyundai i10, the Kia Picanto and the VW Polo do much the same thing, and Toyota hybrids have been stubbornly good at it for years. Then there is the specialist end, where a Land Rover Defender or the right Porsche loses so little that leasing makes no sense at all. Worth checking your shortlist against a list of the fastest depreciating cars before you assume anything either way.

The second factor is how long you actually keep cars. Not how long you tell yourself you will. Depreciation is front loaded, so every extra year you hold on makes the previous ones cheaper, and by year eight you are on the flat part of the curve losing single digit percentages annually. Ownership wins that race easily. Personal contract hire is built for the opposite person, the one who wants something new every three years and would otherwise take the steepest part of the hit again and again for the rest of their driving life.

Which means leasing vs buying a car really comes down to two questions. How fast does this particular model lose value, and how long will you honestly keep it. Answer both truthfully and the decision usually makes itself.

Run the numbers yourself

You do not need industry software for this. Ten minutes and a calculator will get you close enough.

Start with what people actually pay, not the list price. Discounting is normal and the brochure figure flatters the car.

Find a three year old example of the same model and trim at similar mileage on any classifieds site. That is your realistic exit value.

Subtract one from the other, divide by 36. There is your true monthly cost of ownership, before servicing, tax, insurance or interest.

Compare that against a like for like monthly rental at the same annual mileage.

Add the cost of the money itself. Cash sitting in a depreciating asset earns nothing, and if you borrowed to buy, add the interest on top.

Do that for two or three cars and the gap stops being theoretical. Sometimes the two routes land close enough that either is defensible and leasing vs buying a car becomes a question of convenience, in which case personal contract hire just buys you a simpler life. Other times the difference is a few hundred a month and there is nothing to debate.

Conclusion

Depreciation is the quietest big expense in motoring and the reason this question has no single answer. On cars that hold their value, buying and keeping rewards patience. On cars shedding half their worth in three years, a fixed rental hands off a risk you cannot control anyway. The UK leasing fleet passed 2.05 million vehicles in early 2026 with leased cars up 8.4 per cent year on year, and a fair bit of that is drivers running exactly this sum and not liking the answer. Run it on your own shortlist before you sign anything.

Frequently Asked Questions (FAQs)

Q1: Is leasing vs buying a car purely a financial decision? A: Mostly. The maths is driven by depreciation and how long you keep the thing. But predictable budgeting and never having to sell a car privately are worth something too, and only you can price that.

Q2: How much does the average UK car lose in three years? A: Usually 40 per cent to 55 per cent, with the worst of it in year one. The full range runs from under 20 per cent to over 70 per cent, which is why the average is not much help.

Q3: Do electric cars still depreciate faster than petrol ones? A: The older ones did badly. Range and charging improved so quickly that early models aged in dog years. Newer EVs from established brands are tracking much closer to petrol equivalents now, though used prices are still soft.

Q4: Does mileage change how much value a car loses? A: A lot. Residual forecasts assume 10,000 miles a year and going well past that hurts. Same reason lease agreements price mileage the way they do.

Q5: Can I avoid depreciation completely by leasing? A: No, but you avoid the risk of it, which is the useful part. Depreciation is baked into your rental. The difference is that the number is fixed on day one, so if the used market falls off a cliff, that is the funder's problem.