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Lease vs. Buy a Car: Which Is Right for You?


Many shoppers face the decision to lease or buy a car. While it can be a difficult choice, we hope to help make it a little easier. We’ve highlighted several important factors to consider that should make your lease vs. buy decision much easier.

Leasing a Car: Advantages and Drawbacks

Car Lease Advantages

Leasing a car has many advantages, including:

  1. Low to no down payment: Most drivers who lease a vehicle make either no down payment or a very low one, unlike drivers who finance a car.
  2. Less money up-front: Due to the low or no down payment, the up-front cost of leasing is far lower than if you finance or pay with cash.
  3. Pay car depreciation, not interest: Monthly car payments are also lower. Drivers who lease generally make lower payments because they’re basically paying the car’s depreciation. That’s different from financing, in which you’re paying for the vehicle itself, plus interest.
  4. Get to drive new cars: Leasing also lets drivers switch cars frequently. Since the typical lease is two to three years, drivers can get a new car whenever the lease expires.

Car Lease Drawbacks

But there can be disadvantages with leasing, including:

  1. Hassle: When a lease is up, you need to return your car to the dealership or come up with the funds to buy the car. Many drivers will view returning the vehicle as a good thing since they don’t have to try to sell it or trade it in. But it also means you’re back to square one. Either start over with a new lease or purchase something else — that is if you don’t plan to do a lease buyback.
  2. Annual mileage limits: Also, most leases require you to stick to a specific average annual mileage. Sometimes, low lease deals are conditional on staying below 12,000 miles or even 10,000 miles per year. Many drivers will find that hard.
  3. May need to pay fees: If you exceed the mileage in the lease contract, you can be on the hook for significant fees.
  4. Pay for scratches and scrapes: Leases require you to take good care of your car, as well. If you’re the type to scrape parking garage pillars or scratch wheels on a curb, leasing probably isn’t the right choice. At the end of the lease, you’re responsible for fixing everything.
  5. No outside modifications or upgrades allowed: The same is true for drivers who want to alter their cars. Leases rarely allow for any form of modification, from a new stereo to upgraded wheels.

Buying a Car 

For many drivers, buying is the way to go. Car shoppers who pay cash own the vehicle outright, while buyers who finance make payments toward the same goal. Either way, eventually, you own the vehicle, which is not the case if you lease.

Another benefit to financing is you’re using someone else’s money to buy your car. That means you can keep most of your cash for other activities. Yes, those who lease can indeed do the same thing — but if you finance, you eventually get to keep the car once the payments are complete.

Buying or financing a car also allows you to drive as much as you want. There aren’t any mileage restrictions since you own the car — or, if you finance, you will own the vehicle once you’ve paid it off. The same is true about modifications, meaning you can add custom stereos or aftermarket spoilers to your heart’s content.

There are, however, a few negatives in buying. One is you have to make a down payment. While most lease shoppers make little or no down payment, those who finance often have to pay around 10% to 15% of the car’s cost up-front. That can take a big bite out of your savings.

Another demerit for buying is that those who finance often make higher payments than those who lease. This is increasingly not the case, as many lenders try to lower monthly payments by offering longer finance terms. But in that scenario, it just takes longer to pay off your car loan.

Car Subscription Service

If you’re not keen on the idea of car ownership in general, an interesting alternative to the lease vs. buy a car debate is an automobile subscription service. Some car manufacturers offer subscription services for their vehicles, including Care by Volvo, Nissan Switch, Pivotal by Jaguar Land Rover, and Porsche Drive. Some third-party subscription services also exist like Sixt+ and Hertz My Car.

Each subscription service works differently. But the basic idea is that you pay a flat monthly fee and get a car bundled with other costs, including insurance, maintenance, etc. How often you get to swap cars and what services are included with the price varies depending on which subscription service you’re considering. It’s worth shopping around for one that fits your lifestyle and wallet.

Is It Better to Lease or Buy a Car?

It’s always better to own your vehicle. However, market conditions make it challenging to find cheaper vehicles and that is pushing more buyers into the leasing market. So, for now, use this information to help make a wise decision as you set out in search of a new vehicle.

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Editor’s Note: This article has been updated for accuracy since it was originally published.

FAQ

Should I buy or lease a car?

There are pros and cons to leasing a car or owning a vehicle. The primary consideration in the lease vs. buy a car debate is how much you can afford to spend each month. Avoid financial problems and never exceed your budget for an automobile.

How much down payment should you make to buy a car?

A reasonable down payment is 20% to avoid owing more on your auto loan than the car is worth. Some people use the trade-in value of a vehicle as a down payment. If your credit is less than excellent, dealerships will often give you a better interest rate when you make a larger down payment. Use our car affordability calculator to help figure out how much you can afford before heading to the dealership.

Do I need to make a down payment for a car lease?

You might see deals advertising zero-down leases, but leasing a car can be more expensive than you first realize. There are plenty of costs that you’ll have to pay up-front, and while some of them can be negotiated, many others are fixed fees. If you put money down, it lowers your lease payment.

Doug Demuro
Doug DeMuro writes articles and makes videos, mainly about cars. Doug was born in Denver, Colorado, and received an economics degree from Emory University in Atlanta. After graduation, Doug spent three years working for Porsche Cars North America. Eventually, he quit his job to become a writer, largely because it meant that he no longer had to wear pants. Doug’s work has been featured in a... Read More about Doug Demuro

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5 COMMENTS

  1. I’m currently leasing a new Mercedes (as of 1 day ago). The way I see it is, the technology in cars changes so rapidly. If you look at a 2019 CLA 250 vs a 2020 it’s night and day difference in the interior. It’s not even a discussion on which is better. If you can switch out of a car that’s dated after 3 years with relatively the same payment and no upfront cost why wouldn’t you? You’re always under warranty and you’re always current in terms of technology. For me, a person who drives 10 miles a day, it’s a no brainer. I was able to go from a 2014 Chevrolet Sonic RS so a 2020 CLA 250 at almost the same monthly cost. It makes absolute sense for me to lease vs purchase. 

  2. The only reason I am leasing my current truck is because I could get what I want for less up front, and then end up financing the balloon payment at the end b/c I plan on keeping it.  Each scenario is up to the individual, much like renting or buying a home.

  3. I’m leasing a vehicle and I hate it. The 10,000 a year limit is a joke, especially here in Southern California. And my car insurance went up because of the leasing company. I will never lease another vehicle
    • I’d look around at different insurance companies. My insurance went DOWN $100 a month when leasing my new Mercedes vs my Chevrolet. 

  4. I’m leasing a vehicle and I hate it. The 10,000 a year limit is a joke, especially here in Southern California. And my car insurance went up because of the leasing company. I will never lease another vehicle

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