Are you in the market for a new vehicle but don’t know whether buying or leasing is the right option for you? Understanding the difference between the two, can help you make the right decision for your lifestyle.
Understanding the Basics
When you buy a vehicle, you are purchasing a car through an auto loan. Monthly payments go towards repaying the balance of the loan plus interest. Once the balance has been paid, the car is yours!
When you lease a vehicle, you are paying for the value of the vehicle you use during your term plus interest. Monthly payments are made so you can continue using the vehicle. Think of it as renting the vehicle for a fixed amount of time. Lease payments are typically lower because you don’t have equity in the car.
Note: There is often a yearly mileage limit when leasing a vehicle and fees are charged for every mile you go over that limit.
Things to Consider
Once you pay off the balance of your loan plus interest, the car is yours to keep, sell, or trade in!
You don’t own the vehicle. You are “borrowing” the car for the length of time set in your contract. At the end of the lease term, you must return the car.
You can drive as many miles as you want! While excessive miles may decrease the resale value, you are not limited to a set number of miles per year.
The typical mileage limit for a leased car is 10,000—if you drive more than that you may incur hefty fees at the end of your lease.
Payments are higher because you are paying for the entire car. Keep in mind, a higher down payment can lower your monthly payments.
Payments are typically lower, because you are not paying for the entire value of the car.
The vehicle is yours to modify or customize as you like! You can make cosmetic changes or performance improvements at any time.
You are not able to make any customizations or modifications beyond what comes with the car.
Which is a better value for you?
Using our free Lease vs. Buy calculator you can easily compare your monthly payments and total net cost for each option to determine which is the better value.