Buying a New Car or Renting in Spain: Pros and Cons

Not to be confused with car hire, in Spain a renting contract is a long-term rental option that normally includes all costs except for fuel.

Previously aimed at companies and the self-employed, now many individuals are considering this option, and over 20% of new cars are registered for renting contracts. We’ve taken a look at the pros and cons.

What does a renting contract include?

Although most renting contracts cover more or less the same areas, between brands there may be differences.

With a renting contract the car always belongs to the company. Contracts last between one to five years and come with a fixed monthly payment.

All expenses are normally included in the contract: taxes, maintenance, insurances and tyre changes. Check the exact details with the company, for example some may not accept drivers below a certain age due to insurance restrictions.

You’d be responsible for all other expenses such as fuel, traffic fines and road tolls.

What’s cheaper: buying or renting?

If you take all the extra costs into account, and just consider the years that you’d be paying for the renting contract, then renting works out around 3000€ cheaper than buying. BUT remember that the car isn’t yours at the end of the contract!

In Spain are renting and leasing contracts the same?

No they’re not:

  • Renting is a “service product” and leasing a “financial product”. For the self-employed or companies this is an important fiscal differentiation.
  • For individuals the main difference is that a renting contract does not include an option to buy the vehicle for a fixed price at the end of the contract, whereas leasing contracts generally do.

What are the advantages of a renting contract?

  • Monthly payments are fixed for the duration of the contract. This means that they are not affected by any change in interest rates.
  • You don’t need to worry about looking for the best and cheapest car insurance policy, maintenance costs or tyre changes. Due to economies of scale, these costs are lower when contracted by major car companies than if you had to pay for them yourself.
  • Some dealers can arrange for a discount with certain fuel providers or specific gas stations.
  • At the end of the contract you may be able to opt to keep the vehicle or get a new one with a new contract and monthly payment. Remember that if you opt to keep the car, the cost isn’t included in the original contract: when the contract ends the price is agreed between yourself and the dealer, so it may not be what you expect (or can pay).
  • When you buy a car you normally need a large deposit, this isn’t the case with a renting contract.

And the disadvantages?

  • You need to be tax resident in Spain. Paperwork required includes your photo ID, latest tax return and last three wage slips. (Self-employed people will need to provide several certificates, check with the dealer).
  • You need to be able to keep up with the monthly payments. If not the contract will be cancelled and you’ll have to return the car and face a penalty payment. This penalty could be as high as half of the pending monthly quotas.
  • Cars provided with renting contracts cannot exceed a fixed amount of km each year. The contract will include the penalty applied if you exceed the km. However some companies will compensate you at the end of the contract if you have not reached the km limit.
  • The car can only be serviced at an official brand service garage. Depending on where you live and the car brand, this may simply be an inconvenience or you may have to travel a considerable distance.
  • There are no fiscal advantages for individuals that decide to get a new car via a renting contract (companies can offset the cost).

And remember, the car isn’t yours. Even though this may seem a minor issue, for some people this is an important aspect.

Conclusion: should you buy or rent?

A renting contract can seem like an attractive proposition, especially if you’d need a loan to buy a car and would be paying monthly anyway. However you need to do the maths first and work out the total cost of both options.

Over a period of four or five years you could pay less overall with a renting contract, but at the end of that period the car isn’t yours. Of course, if you normally change car every few years then this may not be an issue.