“When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it. When you lease, you pay for only a portion of the vehicle’s cost, which is the part that you ‘use up’ during the time you’re driving it.” *
That’s the difference between buying and leasing. It’s much like renting an apartment rather than buying a home.
Here’s something to think about right off the bat—how long do you intend to keep the vehicle? If you like to drive a new vehicle every couple of years, leasing might be the right call for you.
Let’s take a look at some pros and cons of leasing.
- As mentioned above, you can upgrade to a new/different model every few years when your lease is up
- You’ll likely be covered concerning any major repairs over time, saving you some money
- A lease may come with lower monthly payments vs. purchasing with typical loan terms
- You have a lower tax hit as you won’t be paying sales tax on the entire vehicle purchase price
- Lower down payment
- No trade-in hassles
- Terminating a lease may be costly
- You don’t own the vehicle at the end of the lease
- If you have a longer commute to work, or just rack up a lot of miles each year, the miles restrictions on many leases could cost you quite a bit extra. Typical mileage limits are 12,000-15,000 miles a year
- Because the vehicle is not yours, you’re likely not allowed to add any modifications
- If you’re hard on vehicles, wear and tear charges can add up at lease termination
You’ll also notice two different kinds of leases, open and closed. With an open lease, you’re able to negotiate a possible purchase of the vehicle at the end of the lease agreement. With a closed lease, no such option is available.
So how about buying? Let’s look at some of the pros and cons there as well.
- You can modify your vehicle in any way you choose
- If you keep your vehicles for a longer period of time, buying can be more economical
- You can drive as many miles as you like with no penalties
- You can sell the vehicle whenever you like
- Usually a higher down payment
- Higher monthly payments
- When the warranty expires, you’re responsible for maintenance costs
- The hassle of selling/trading in the vehicle is on you when it’s time to get rid of it
In a nutshell, if you’re going to be in your vehicle for a shorter time and you don’t drive many miles on average, leasing can be your better option. However, if you’re in the vehicle for the long haul, buying could work better for you.
Use our Lease vs Buy calculator to figure out which option is best for you.