Buying vs. Leasing

Buying vs. Leasing a Car

Knowing the key differences between buying and leasing can help you make the smartest decision for your budget, lifestyle, driving habits, and personal goals.

Below is a comparison of the advantages and disadvantages of each option, the financial impact, and the reasons you might lean toward one method over the other.

BUYING

Who Owns It

You can either pay cash for a vehicle or finance it with monthly payments. In either case, the car is yours.

If you take out a loan, you must meet the lender’s requirements, such as providing a down payment and making timely payments. Failure to do so could result in repossession.

Because most buyers don’t pay in full upfront, financing through a dealer, bank, credit union, or other lender is common. The loan usually covers the vehicle's value plus interest, repaid over a term of three to six years.

Loan terms and rates are based on your credit, income, and the car’s value. Once approved and the documents are signed, you own the vehicle and can use it however you like.

Upfront Costs

When financing a vehicle, lenders typically require a down payment as a security measure. It’s recommended to put down 10% to 20% of the MSRP, which can help reduce your monthly payments.

You can also trade in a current vehicle to put its equity toward the down payment. The exact amount depends on your credit score and the lender’s criteria.

Future Value

New vehicles lose value over time. In fact, a car can drop nearly 20% in value during the first year alone, according to Trusted Choice Insurance. Depreciation depends on brand, model, market, and age.

Despite this, buying helps build equity—especially if your payments exceed the rate of depreciation. That equity can help fund your next vehicle purchase down the road.

The car’s future value depends on its condition and how well it’s maintained. (Tip: Keep up with regular maintenance from an authorized service center to protect your investment!)

End of Payments

After you complete your loan payments, you own the car outright. The lender will send a lien release confirming full ownership is now in your hands.

LEASING

Who Owns It

When leasing a vehicle, you’re not the owner. Instead, you’re paying to drive it for a set period. Ownership remains with the leasing company, which is why monthly payments are usually lower than buying.

Leasing also offers some protection from depreciation. For instance, if the car’s value drops due to unforeseen issues like a recall, it won’t impact you the way it might if you owned the vehicle.

Upfront Costs

Leases usually require minimal upfront payment—typically just the first month’s payment, a security deposit, acquisition fees, and taxes. However, paying more upfront can help reduce your monthly costs.

Future Value

Since you won’t own the vehicle at the end of the lease, resale value isn’t your concern. However, be mindful of mileage limits (usually 12,000–15,000 miles per year) and wear-and-tear policies to avoid extra charges.

Lease terms generally last two to three years, ideal for drivers who enjoy switching to newer models often. Leasing can also give you access to higher-end vehicles for a lower monthly payment.

End of Payments

At lease end, most people return the vehicle. Some choose to buy it outright or trade it in before the term expires. Be sure to ask us about these options so we can tailor your lease to fit your needs.

Best Cars to Lease

Cars that retain more of their value by the end of the lease make the best lease choices. The less they depreciate, the less you pay. Be sure to check vehicle lease ratings to identify top-value options.