Pros and cons of leasing vs. buying a car

If you’re trying to decide whether to buy or lease a car, both options have benefits and drawbacks. When you buy, you own your car outright once you repay your auto loan, and you have more flexibility regarding mileage and vehicle customization than you would with a leased vehicle. But your upfront and ongoing maintenance costs could be higher when you buy—and your monthly payments probably will be, too.^[1]  

This guide can help you understand whether leasing vs. buying a car makes more sense for you. 

Leasing vs. buying a car: what’s the difference? 

Understanding the differences between leasing vs. buying a car can help you make an informed choice if you’re shopping for a new vehicle.  

1. Ownership 

When you choose to buy a vehicle, you will eventually own your car at the end of your loan term. With a lease, your monthly payments cover the estimated depreciation of your car with interest, so you won’t build equity or own your car at the end of its lease term.^[1]   

2. Upfront costs 

Your upfront costs may be higher if you choose to buy vs. lease a car. When you buy, you’ll generally need to pay sales tax on your car, plus registration and origination fees. Your lender might also require a down payment, which increases your initial costs.  

Your initial costs may be lower with a lease because a down payment isn’t always required, though other fees apply. Your leasing company may charge acquisition and disposition fees, which cover the cost of setting up your lease agreement and cleaning and selling your car at the end of your term. You’ll also pay registration fees.^[1]   

3. Monthly payments 

When you buy or finance a car, your monthly payments go toward interest and loan principal, so they tend to be higher than what you’d pay with a leased vehicle. With a lease, your monthly payments go toward interest and the estimated depreciation of your car during its lease term.   

Your payments might be higher if you choose to buy, but you’ll only make them during your loan term. After that, your loan will be repaid and you’ll own your car outright. When you lease, your monthly payments continue for as long as you choose to lease a car.^[1]     

4. Insurance 

You’ll probably need full-coverage insurance whether you lease or buy a car, but you might need more coverage for a leased vehicle. Full coverage typically includes collision, comprehensive, and liability insurance, but leasing companies often require gap insurance, too. Gap insurance protects the lessor if your car is totaled after an accident. It pays for the difference between what your vehicle is currently worth and the amount you owe on the loan.^[2]    

Besides having stricter coverage requirements, some lessors also limit your deductible, or the amount you pay out of pocket before insurance kicks in, which isn’t the case with lenders. Lower deductibles typically result in higher monthly payments.^[3]     

5. Warranty protection 

Leased cars often have warranties that are effective for your entire lease term. These warranties typically cover regular maintenance costs and repairs, so you won’t need to worry about high unexpected costs cropping up with a leased car.  

On the other hand, if you buy a car new, it may have a warranty that covers certain maintenance or repair costs. But that warranty will likely only be effective for a few years, after which you’ll need to pay for regular maintenance and repairs.^[4]  

6. Mileage 

You can drive as many miles as you’d like when you buy or finance a car, but this usually isn’t the case when you lease. Leasing companies often cap your mileage at 12,000 or 15,000 miles per year, and fees typically apply if you exceed your allotted mileage.^[1]  

7. Flexibility to customize 

Buying a car gives you more flexibility to customize it compared to leasing. So if you’d like to tint your windows or upgrade your wheels, you can do so when you buy or finance a car—but not if you lease.   

8. Sellability 

You can sell your car anytime when you buy or finance it. Unfortunately, you won't have this option with a lease because you can't sell a leased vehicle. Instead, you'll need to turn it in at the end of your lease term or buy it from the leasing company for its full value.^[1] 

9. Depreciation 

Once you purchase a car, it typically loses value (depreciates) instantly. While depreciation may be a concern if you own your car and try to sell it before you've established positive equity (when the remaining loan balance is less than the car's current market value), it’s less of a concern with a leased vehicle. Rather than selling, you’ll turn in the leased car or buy it for its full value once your lease is up.^[1] 

Pros and cons: Buying vs leasing a car 

When leasing a car makes sense 

Leasing a car could be a better option than leasing if you:  

• Don’t drive far or frequently: Many leases have mileage caps between 12,000 and 15,000 miles annually, so leasing could make sense if you have a short commute or don’t drive often.  

• Get new vehicles often: If you prefer the dependability and features of newer cars, leasing may be the right choice. Lease terms are typically short, and you can simply turn in your car and lease another, newer vehicle once your term ends.  

• Want low maintenance costs: Many lease warranties cover certain maintenance and repair costs for your entire lease term, so you won’t need to worry about unexpected expenses. 

• Can afford ongoing monthly payments: While you might not pay for maintenance and repairs, you’ll make monthly payments for as long as you lease a car.  

When buying a car makes sense 

Buying a car could be better than leasing if you:  

• Have a long commute or drive often: Since leases often have mileage caps, buying a car may be your best option if you drive more than 12,000 or 15,000 miles a year.  

• Have a down payment saved: If you have a down payment set aside for a new car, buying could be a better choice. Making a down payment means you may have instant equity and benefit from lower monthly payments.  

• Keep vehicles for several years: Buying may be a better option if you typically keep cars for several years. You’ll eventually repay your auto loan and own your car outright—and the lack of monthly payments may mean more potential for long-term savings. 

• Want more flexibility: Buying could also make more sense than leasing if you want the freedom to customize your car as you please.  

The bottom line 

Ultimately, choosing between leasing vs. buying a car depends on your preferences, habits, and goals. Buying is likely the better choice if you have a long commute or want to own your car eventually. Buying may also result in long-term savings, though your upfront costs may be higher. When you buy, you can also choose to refinance your auto loan if you’re not happy with the terms or your credit situation has improved.   

On the other hand, leasing could be a good choice if you don't drive often and enjoy the benefits of newer cars. Leasing might help you save money in the short term, but perpetual monthly payments and higher insurance rates can mean higher long-term costs.    

1. Consumer Financial Protection Bureau. “What should I know about leasing versus buying a car?” 

2. Insurance Information Institute. “What is auto insurance?” 

3. Insurance Information Institute. “Insuring a leased car.” 

4. Kelley Blue Book. “Car Leasing Guide: How to Lease a Vehicle in 2024.”