Is it better to lease or finance a car?

What are the advantages to leasing a car?

Lower monthly payments

When you lease a vehicle, the monthly payment will likely be cheaper than what you'd pay if you purchased the same vehicle. So, you're driving a new car without the bigger price tag of buying a new car.

You may not have to pay for basic maintenance with a leased vehicle

In many cases, a car you lease might still be under warranty, or the leasing company might provide some maintenance coverage. For example, you may not be responsible for standard maintenance like oil changes when you lease a vehicle, which can save you money on maintenance costs.

Driving a vehicle with current technology and safety features

Leasing a car allows you to experience some of the new technology and safety features of late model cars for less money.

What are the disadvantages to leasing a car?

Your monthly lease payments are not building equity

Your lease payments cover the depreciation of the vehicle, but it's like a long-term rental in that you return the vehicle at the end of the term.

A leased vehicle has mileage restrictions

Leasing companies restrict how many miles you can drive a vehicle per year. The standard mileage is typically around 12,000 miles annually, depending on the leasing company. If you exceed the annual mileage limit, you'll have to pay a charge for every mile driven after that. You may also have to pay penalty fees after exceeding the maximum annual mileage. If you know you'll drive more than the annual mileage limit, you might consider buying a car instead.

It may cost you to get out of the lease early

There may be a fee when you turn in the car at lease end. You'll pay sales tax, and depending on the terms of your contract, you may be required to pay off the remaining lease balance, and an early termination charge.

What are the advantages/disadvantages to buying vs leasing?

The advantages of buying include:

• You own the vehicle
• No mileage restrictions
• Freedom to customize it

You can use a vehicle you own for commercial or rideshare work

If you rely on a vehicle for work, buying a car might be your best option. It gives you more control over the vehicle and has no mileage restrictions. In contrast, leasing companies may restrict commercial or rideshare work like Uber, Lyft, or on-demand delivery services. The added miles you're driving could easily send you over the annual mileage limit. Learn how rideshare insurance works.

Buying a new car costs more than leasing, but you build equity with each payment. If you finance the purchase, you typically need a down payment that ranges from 10 to 20 percent of the car's value, and then you'll need to make a monthly payment. According to Edmunds, the average monthly payment for new vehicles hit an all-time high of $736 in 2023.

Leasing a car can have high upfront costs too, but your monthly payment may be less than what you'd pay if you were financing a new car at full price. A lease may require a security deposit. Some leases include other fees like bank fees, and you might also be required to pay sales tax on the security deposit. Some states will require you to pay registration fees as well.

The downsides of buying include:

• High down payment
• High monthly payment
• Maintenance requirements

The advantages of leasing include:

• Lower monthly payments for a nicer car than you might be able to buy
• No worries about scheduled maintenance
• Driving a new car with high-tech features

The downsides of leasing include:

• Excess mileage fees
• Wear and tear fees
• The requirement to turn in the vehicle when the lease ends

Our leasing vs. buying car calculator can help you easily compare the costs of both options.

Other things to consider when leasing or buying a car

Leasing companies may require more insurance coverages or higher limits than lenders, so you may pay more for insurance for a leased car versus a car you bought. You might also face penalties if you return the leased vehicle in poor condition, such as chipped paint, dents, rips in the seat fabric, and other wear and tear.

While maintenance and repairs may be easier with a leased vehicle, you can't modify the vehicle in any way. If you want to install your own sound system, aftermarket parts, and other custom equipment, you'll need to buy a car instead.

Should you lease or finance a car?

There are benefits to both leasing a car vs buying a car. If you want to trade in your vehicle for a newer model every few years and you don't drive long distances, then leasing can be a viable option. However, if you drive often, want to customize your vehicle, or you want more control over the amount of insurance you carry, buying a car may be the better choice.

Deciding whether to lease or buy a car isn't always easy. Ask yourself how far you regularly drive, how often you want to upgrade to a new vehicle, and whether the insurance and monthly payments fit your budget. Ultimately, it's a question of renting versus ownership. You can trade your keys in for a new set at the end of a lease. If you own a vehicle, it's yours to drive for years after you pay it off.