Should You Buy or Lease Your Car?

To buy or lease? If you’re in the market for a new car, that’s one of the first questions you have to ask yourself. Put in the most simple terms, buying a car means that you are the owner. Leasing a car is more along the lines of borrowing a car for a pre-agreed upon length of time then having the option to buy it or trade it in for a newer model.

Cost/Monthly Payments

Going strictly on a month by month basis, leasing fees are significantly less expensive than loan payment fees (often half of what you’d pay if you own a car), but if you’re not careful about abiding very carefully by the rules of your lease, you could end up having to pay the dealership for unexpected costs at the end of your contract. Things like going over your mileage allowance and not taking care proper care of the physical state of the car could wind up costing you more in the long run than buying a car outright would. In fact, looking at long term costs, buying a car is almost always cheaper than continually leasing.

By the same token, car owners who aren’t careful could wind up with an upside down car loan – meaning the duration of their loan is longer than advisable and they wind up owing more on the loan than the car is actually worth. Take a look at your finances, and ask yourself how much you’re comfortable paying a month. Keep in mind that car loan payments do stop eventually, while a person who leases will always have to keep paying the dealer.


One of the key clauses in a leasing agreement is that drivers are not to go over the allotted monthly mileage. Dealers still plan to sell leased cars to other buyers once the lease is up, and in order to guarantee a good likelihood of sale, they have to ensure the car is still enticing. As a result, you will be heavily penalized for going over the mileage limit.

If you’re the kind of driver who knows exactly how much (or how little) you’ll use your car and are able to ensure that you won’t exceed your mileage limitations, fantastic. If not, it’s better to look into owning a car because the slightly higher monthly payments will probably be less than what you end up owing for the lease + the penalty fees.


Another key part of a lease contract is that you’re responsible for ensuring the car is up to snuff mechanically and comes in to the dealership for regularly scheduled upgrades and maintenance. Again, the dealers are thinking long term and want to be able to sell the car after your lease is up, so it’s more for their benefit than for yours, but the positive side is that your car is much less likely to break down, and is also constantly up to safety standards. The downside is the cost.


Car leases are simultaneously rigid and flexible. If you choose to lease, you’re stuck in your contract until the lease is up because the penalty for breaking your lease can be astronomical (and often amounts to the same costs as just sticking it out). That being said, choosing to lease means that you get to upgrade to a new car every couple of years without being forced to commit. It also means you get to drive cars that you might not be able to afford otherwise.

Car loans are flexible in the sense that you’re not locked into owning your car forever, and can sell whenever you’d like. You’ll still have to pay back the remainder of your loan, but you won’t accrue additional penalty fees like you would with a lease. You also have the freedom of knowing that your car belongs solely to you and that, once you’ve paid it off, you get to keep a significant chunk of change each month to do whatever you’d like with.

Length of Agreement/Loan

A typical car lease runs anywhere from 2-4 years, while a typical car loan can run the length of one year up to eight (depending on how much your monthly payments cost). Of course, there’s always the option of buying the car outright with cash, but that’s something most of us can only fantasize about.

Once your car lease is done, you’re free to either buy the car (by paying off the remainder of what the car costs), trade it in for a new car and continue with leasing, or stop leasing altogether. A car loan is less restrictive in what you can and can’t do (though, as mentioned previously, beware the upside down loan).