Which Is Better for You: Leasing or Buying?

What’s the best way to get a brand-new, dependable set of wheels? It’s critical that you carefully consider the make and model of the car you want to drive, as well as other elements like amenities and mileage. However, from a financial perspective, choosing to lease versus buy is one of your most crucial choices. Each option has advantages and disadvantages, just like many financial decisions, so think about the following things before you sign on the dotted line.

Leasing a car

When you lease a car, you typically pay a down payment and consent to making monthly payments for a new car over a predetermined period of time. Lease payments do not contribute to the creation of equity or ownership in the vehicle; rather, they cover estimated depreciation (the amount of value the car loses during the time you own it) and finance costs. Most lease agreements have an annual mileage cap, and if you drive more than that, you might be charged. Calculate your annual mileage over the past few years so you can agree on a limit that works for your lifestyle. If the lease is open-ended or equity, you consent to buying the car outright at the end of the term for a set price. With a closed-end lease, after any outstanding fees are paid, you are free to vacate the vehicle.


By leasing, you can occasionally drive a new car with no down payment and lower monthly payments every few years. You won’t need to find a new owner for the vehicle once the lease is over. A manufacturer’s warranty will frequently cover the costs of maintenance or repairs if your car needs them.


Despite having more affordable monthly payments, leasing a car rather than buying one will end up costing more in the long run. This is due to the fact that when the lease expires, you won’t be able to recoup some of your costs by selling the car. Furthermore, you will be responsible for paying the car’s depreciation when it is highest (during the first few years of ownership), and a newer car may cost more to insure. Remember that if you want to break your lease early, you might be subject to a penalty.

Buying a car

How long you plan to drive the car is a key consideration when purchasing one. Knowing how long you plan to keep the car will help you prioritize different features, such as the model year or mileage you want. Remember that some vehicles hold their value better than others if you plan to sell or trade them in at some point. Maintaining your car’s resale value can be achieved through routine maintenance and careful driving.


If you plan to keep the vehicle for a number of years after the loan is paid off, buying a car is typically a better deal than leasing in the long run. This is because, at the end of the loan, you will own the vehicle and have no further obligation to make monthly payments. Your potential savings are even higher if you finance a used car as opposed to a new one. Purchasing gives you the option to keep the vehicle or sell it when the loan term is up. You are also free to drive as many miles as you want each year, though high mileage does lower a car’s resale value.


You typically pay more up front for a down payment when you purchase a car. Although this sum is negotiable, the size of it will have an impact on the total amount of interest you pay and the length of your loan. You are in charge of paying for repairs as a car owner, which could get expensive over time.

Making the decision

When deciding whether to lease or buy, take into account your preferences and financial situation. Before finalizing the deal, find a trustworthy car dealer and make inquiries. Utilize an online lease or purchase calculator to compare specific offers while entering real lease or loan terms. To determine the effects of buying versus leasing a car on your financial situation, consult a financial or tax advisor.

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