What Are the Benefits of Leasing a Car? Learn the Pros and Cons (2024)

Pros of leasing a car

Lower monthly payments

A monthly lease payment may be less than a loan payment on the same car. A lease payment accounts for the depreciation value of the car, rather than the total value of the car when it’s purchased.¹

Fewer costly repairs

Generally, leased cars are newer and in better condition. Cars in their prime years are less likely to need costly repairs. Typically, leased cars are covered by the manufacturer’s warranty and include free oil changes and other, covered repairs.²

A safer vehicle

Leasing a car allows you to drive a nicer vehicle than you may be able to afford if you bought a car outright or got a car loan. As a result, you may get a car with better safety features.²

Tax advantages

Self-employed? You may be eligible for tax benefits on a leased car. But if you also use the vehicle for personal reasons, you may need to prorate the deduction based on a percentage of use.³

Easy returns

When your lease ends, you can just return the car to the dealership. You don’t have to worry about finding out the car’s trade-in value or finding a buyer.²

Cons of leasing a car

Higher overall costs

Over time, leasing a car costs more than buying one, especially if you lease multiple cars in a row and have monthly payments for years. In contrast, if you take out a loan to buy a car, you’ll eventually pay it off.²

Wear-and-tear fees

It’s important to return a leased car in pristine condition—or you may get stuck with a costly wear-and-tear fee. Kids, pets or just a few dings from parking lots can rack up wear-and-tear fees.¹

Limited mileage

Most lease contracts limit the number of miles you’re allowed to drive, typically 12,000 per year. Be aware of “low mileage” leases, which only allow 10,000 miles per year. If you go over, fees can range from 10 to 20 cents per mile.^2,4

Early termination fees

Many car leases have early termination fees or other penalties if you need to cancel early. Sometimes, these charges can cost as much as the entire lease.²

Costly parts

You’ll still have to pay for some maintenance, like new tires. Depending on your vehicle, this may be expensive, especially if it’s a nicer vehicle that has high-end wheels.²

Cost of leasing vs. buying

Here’s a breakdown of the average total out-of-pocket costs over six years (the average length of time an American keeps a car) for a compact SUV.⁶

• Leasing a car: $29,882*
• Buying a new car: $32,466
• Buying a used car: $24,335

* An average lease lasts three years. To accurately compare to the average six-year loan/ownership of a vehicle, this lease estimate includes a second three-year lease.⁶

Steps to return a leased car⁸

• Prepare for an inspection. If you see minor dents or paint chips that you can repair on your own, now’s the time. Do anything possible to prevent additional wear-and-tear fees.
• Get a second inspection. If you get an initial inspection and then decide to make repairs, it’s OK to get a second inspection. It may help you save in fees.
• Pick a dealership. Usually, you can return a leased car to any dealership that’s the same brand. But you may have the easiest experience returning it to the same dealership where you initially leased the car.
• Give back everything. Clean out your car to ensure you have all your belongings. Gather all the leased items, including a second set of keys, floor mats or spare tires. Otherwise, you may get charged for keeping these items.

How leasing impacts auto insurance

Whether you lease or buy a vehicle, you’re likely legally required to purchase auto insurance. If you lease a car, though, you may have to pay for more coverage. Leasing companies often want to ensure their cars are fully protected—which means requiring the lessor to buy more insurance protection. Discuss your insurance requirements when negotiating your lease. Understanding more of the process benefits you in the long run.

You can also call your auto insurance company at any time to learn about your policy details. It’s possible they’ll help you negotiate a lower price or share details about your current coverage. Remember, your insurer is there to advocate for you.