Lease vs. Buy - Pros and Cons of Leasing vs. Buying

Which is better - leasing a car or buying a car? The truth is that both have their pros and cons and it depends on your individual situation which one better suits your needs. This article aims to give you more information about buying and leasing a car in order to be able to make an informed car lease-versus-buy decision.

Difference between Leasing and Buying a Car

Leases and car purchase loans are two completely different methods of car financing.

Car purchase loans finance the purchase of a car; they enable people to buy their vehicles.

A car lease finances the use of a car; it is more of a rental agreement.

Once you make all the car payments on your installment loan, the car becomes your property. It doesn't matter how many miles you drive it or whether you will damage it; you own it. On the other hand, when you make all the payments on a car lease, you own nothing. You don't pay the entire cost of the car, only the portion you have "used up" while driving it.

So What Should You Do - Lease or Buy?

We all have different lifestyles and priorities and it depends entirely on what is more important to you.

Who should buy?

If you are a person who prefers to build equity in his/her car and likes the idea of car ownership, then buying the car may be the better option to you. You should have in mind, though, that car payments are generally bigger than lease payments.

Car buying is also particularly recommended over car leasing if you expect lifestyle changes and cannot afford the risk of being penalized for early lease termination.

Additionally, since leased cars have certain limitations for the number of miles, if you drive your car more than average miles you should probably choose buying over leasing.

Who should lease?

If you want to drive a new car every two years and don't mind that you will not build ownership equity, then you would be better if you lease. You would benefit from lower monthly payments and a car that is always under warranty and has the latest safety features.

Heave in mind, though, that you will be allowed to drive a certain number of miles and if you exceed this number you will have to pay. You may be also charged for excess wear and tear.

Nowadays, leasing has turned into a way of driving more car than you can afford. A big portion of the new BMW, Mercedes-Benz, and Lexus cars on the road are leased.

The information and interactive car payment calculators that are provided on this site are made available as general assistant guidance in regards to car loans and payments. We do not guarantee that any information or calculations will be accurate or applicable to your personal financial situation, circumstances, or objectives. Accordingly, before making any final decisions we encourage you to consult a qualified professional and get personalized advice.

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