Lease vs. Buy Car: Which Should You Choose? (2024) (2024)

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Ultimately, the question of whether it’s better to lease a car or to buy it comes down to your financial situation and your preferences around cars. While leasing a car comes with a lower down payment and monthly payments, you often pay more over time than if you bought the vehicle outright. If you’re buying a vehicle it costs less over the long term to take ownership, but that can be outweighed by the cost of maintenance and repairs.

To help you make the right decision for you, we’ve provided the best times to lease a car and finance or buy vehicles.

When It’s Best to Lease a Car

Here are a few situations in which it’s better to lease a car than to buy one:

• You prefer new cars: Leasing a new car every few years is a good way to have one of the latest models and the newest technology without the hassle of buying and selling.
• You don’t want to worry about repairs: Since most cars you lease will still be under the factory warranty, leasing a new vehicle significantly reduces the chance you’ll have to pay for car repairs out of pocket.
• You don’t have a large down payment: Even if you can buy a car without putting much down, it’s not always a good idea. Paying the bare minimum down payment can leave you upside down on your car loan, sometimes for several years of your loan term. That’s a much riskier financial position than leasing a car.

When It’s Best to Buy a Car

In some cases, buying a car can be a better idea than leasing. Here are some of the best times to buy a car:

• You don’t want to worry about mileage: If you like the occasional road trip or could see yourself putting a lot of miles on your car, you’ll run the risk of exceeding the mileage limit that comes with a lease. Buying a car puts you in charge of the number of miles you can put on your vehicle.
• You can afford a large down payment: If you can afford to put enough money down on a car to avoid being upside down on the loan, you eliminate a lot of financial risk. You may also end up with a lower monthly payment than you might have with a lease.
• You want to own the car for a long time: While you can buy a lease out, you’ll likely save money in the long run by buying your car without leasing it. If you plan to own a car for a long time, buying it can help you save money and get to a point where you don’t have to make car payments.

Which option is better for you between leasing and buying a car is one part financial situation and one part preference. In either case, fully research your options and get a realistic picture of your finances.

The main difference between leasing and buying a car is who has ownership over the vehicle once the financing term ends. For leasing you only are able to drive the vehicle for as long as you are leasing. However, when you buy a car and pay it off, you’ll get the title for the car and will have full ownership.

There is more to the story than this so we’ve broken down and detailed each option so you can compare them.

What Does it Mean to Lease a Car?

Leasing a car is essentially renting it long term. You make monthly payments to drive the car for a specified period of time and number of miles. Most often, lease contracts are financed through a car dealership and last for a period of three to four years.

To lease a car, you’ll first need to pay some money up front. This covers fees from the dealership, taxes and other small costs. As part of your lease deal, you’ll agree to a set rate to pay each month and the length of the car lease term.

At the end of the term, you’ll return the car to the dealership you leased it from. You’ll need to pay fees for any damages or unusual wear and tear if the car isn’t in top condition, as well as any mileage overages. However, you also have the option to pursue a lease buyout loanat the end of the term.

What Does it Mean to Buy a Car?

Unless you have the money to pay for a car in cash, you’ll have to borrow money from a bank or other lender. That means the lender, and not you, truly owns the car until you make your final loan payment. The loan terms for buying a vehicle tend to have higher monthly payments and require larger car down payments.

However, as long as you make the agreed-upon monthly payments, you can do anything you want to the vehicle. This also means that you ultimately will be taking responsibility for any maintenance, repair, or replacement costs associated with your vehicle. So if you have a mechanical breakdown and are not covered under a factory planor extended warranty, you’ll have to foot the bill.

Below we have detailed the main advantages and drawbacks of leasing a car instead of financing or buying.

Pros of Leasing a Car

There are some benefits of leasing a car instead of buying. These include:

• Covered repairs: Most leased cars will fall under the manufacturer’s warranty. That means some repairs should be covered during the lease period.
• Less money down: The money due at signing for a lease varies, but your up-front costs for starting a lease are likely to be far less than those for taking a loan out. Sales tax, for example, is much lower on a lease in most states than it is if you purchase a car.
• Lower monthly payments: Unless you make a large down payment when buying a car, leasing is likely to have lower monthly costs.

Cons of Leasing a Car

There are also significant drawbacks to leasing a car as opposed to buying one. These include:

• No equity: When you buy a car, part of your monthly payment goes toward the principal of the car loan and builds equity for you. When you lease a car, 100% of the money goes to the car owner and doesn’t build any equity for you.
• Mileage restrictions: Auto leases typically come with a limit on how many miles you can drive, which is usually 12,000 annually. If you exceed your mileage limit, you’ll have to pay a fee.
• Additional fees: Some leasing companies require security deposits. Others charge early termination fees if you end your lease before the date in your contract or buyout fees if you decide to buy the car when your lease ends.
• Condition requirements: While you don’t own a car that you lease, you’re still responsible for damages. If you return the vehicle damaged at the end of the lease, you’ll have to pay fees for what the automotive dealer deems excessive wear and tear.

In the sections below we’ve outlined the pros and cons of buying or financing a vehicle.

Pros of Buying a Car

Buying a car has its own benefits compared to leasing one. Here are a few of them:

• No restrictions: When you finance a car, you don’t need to worry about mileage limits or cosmetic damage. While they do affect the value of your vehicle, you won’t pay penalties for them.
• Builds equity: Part of your car payment goes toward the loan principal. That money is essentially stored value in your vehicle and can serve as trade-in value toward your next car.

Cons of Buying a Car

There are, however, disadvantages to buying a car instead of leasing it. These include:

• Risk of an upside-down loan: Owing more on your vehicle than it’s worth is known as being upside down on your car loan. If your car gets totaled and you don’t have gap insurance to cover the difference, you could still have to make car payments on a car you no longer have.
• Repair costs: When you own a car, the cost of repairs is your responsibility after your factory warranty expires.
• Higher down payment: Some lenders may require you to put down a substantial amount to finance a vehicle purchase. Depending on your financial situation, this might not be possible.
• Depreciation: The value of the car you get goes down almost immediately after you buy it, especially if it’s new. That means a significant portion of the money you spend gets lost to depreciation.

While each option comes with its pros and cons, the choice that is right for you depends on your particular wants and needs. For example, leasing is typically better if you want to have a new vehicle, but buying can be a good option if you want a used car. However, whatever financing option you choose we recommend comparing multiple providers to get the best deal for you.

Recommended Auto Loan Providers

Leasing a car might be a great option for some people. But if you’re ready to buy a car, consider your financing options before you start seriously shopping. Some dealerships can get you good interest rates on car loans, but you may find better offers elsewhere. Getting a preapproved car loan can also put you in a better negotiating position.

The only way to know for sure who has the best auto loan rates for you is to get finance offers from a few lenders and compare. We recommend checking out myAutoloan and Auto Credit Express.

myAutoloan: Most Popular Marketplace

Once you submit your information on myAutoloan’s financing marketplace, lenders will make competing offers to loan you money for a car. This method makes it easy and efficient to compare loan offers and find the best rates for you. Borrowers with lower credit scores can also find loans through the marketplace, as myAutoloan is open to applicants with scores as low as 575.

Read more: myAutoloan review

Auto Credit Express: Good Option for Bad Credit

Auto Credit Express positions itself as an option for bad credit car loans. And while the company has lending options for just about everyone, including those with very low credit scores and current bankruptcies — we found that borrowers with good credit may want to take a look as well. Between helpful tools on the website, many types of auto loans and an easy process, Auto Credit Express has something for many potential borrowers.

Read more: Auto Credit Express review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

• Reputation (25% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
• Rates (25% of total score): Auto loan providers with low APRs and high loan amounts scored highest in this category.
• Availability (25% of total score): Companies that cover a variety of circ*mstances are more likely to meet consumer needs.
• Customer Experience (25% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness, friendliness and helpfulness of each warranty company’s customer service team based on our shopper analysis.

*Data accurate at time of publication.