Buy vs. Lease a Car: What’s the Better Financial Move?
Every handful of years, many of us face a common dilemma: buy vs. lease a car. Both options have distinct financial advantages and drawbacks. The right choice depends on your driving habits, financial goals, and personal preferences.
This guide breaks down the key differences between buying and leasing, helping you make a decision that supports your overall financial plan.
What It Means to Buy a Car
When you buy a car, either with cash or through financing, you gain full ownership of the vehicle. Once your loan is paid off, the car becomes an asset you can keep, sell, or trade.
Advantages of Buying:
- Equity Building: Every loan payment builds ownership. After the loan term ends, you have a vehicle with residual value.
- No Mileage Limits: Unlike leases, there are no restrictions on how much you drive.
- Flexibility: You can modify the vehicle, keep it for many years, or sell it at your discretion.
Disadvantages of Buying:
- Higher Upfront Costs: Buyers typically face larger down payments and higher monthly payments compared to lessees.
- Depreciation Risk: The car’s value may decrease faster than the loan balance, especially in the first few years.
- Maintenance Costs: After the warranty period, all repair and maintenance expenses are your responsibility.
What It Means to Lease a Car
Leasing a car is similar to renting. You pay to use the vehicle for a specified period—usually 24 to 48 months—then return it at the end of the lease.
Advantages of Leasing:
- Lower Monthly Payments: Leases generally offer lower monthly costs compared to loan payments for the same vehicle.
- Newer Vehicles: Leasing allows you to drive newer models with the latest technology and safety features.
- Minimal Repair Costs: Most leased cars remain under warranty, minimizing repair expenses.
Disadvantages of Leasing:
- No Ownership: Lease payments do not build equity. At the end of the lease, you must return the car unless you opt to buy it.
- Mileage Restrictions: Leases often limit annual mileage to 10,000–15,000 miles. Excess mileage can trigger significant penalties.
- Wear-and-Tear Charges: Excessive cosmetic or mechanical wear can result in additional fees when returning the vehicle.
Buy vs. Lease: A Side-by-Side Comparison
| Factor | Buying a Car | Leasing a Car |
| Upfront Costs | Typically higher | Typically lower |
| Monthly Payments | Higher | Lower |
| Long-Term Cost | Lower if vehicle is kept long-term | Higher due to ongoing lease payments |
| Mileage Limits | None | Typically 10,000–15,000 miles per year |
| Maintenance Responsibility | Full responsibility after warranty | Usually covered by warranty |
| Ownership | Yes | No |
When Buying a Car Makes More Sense
Buying may be the better financial choice if:
- You plan to keep the car for more than five years.
- You drive more than 15,000 miles per year.
- You value building equity and eventually owning a car free and clear.
- You want the flexibility to modify or sell the vehicle at any time.
When Leasing a Car Makes More Sense
Leasing may be more appropriate if:
- You prefer lower monthly payments and minimal upfront costs.
- You like driving a new car every few years.
- You drive a predictable, moderate number of miles annually.
- You want to avoid long-term maintenance and repair costs.
Decision Matrix: Buy vs. Lease
Use this quick reference to assess your situation:
| If You Value… | Consider… |
| Long-term savings and ownership | Buying |
| Driving a new car every few years | Leasing |
| No mileage restrictions | Buying |
| Lower monthly payments | Leasing |
| Flexibility to modify your car | Buying |
| Always driving a car under warranty | Leasing |
The Bottom Line
Choosing whether to buy or lease a car depends on your financial goals, lifestyle preferences, and driving habits. Buyers tend to benefit financially over the long term, while lessees enjoy lower monthly payments and more frequent upgrades.
Before deciding, carefully consider your priorities—and if necessary, consult with a financial advisor to ensure your choice aligns with your broader financial plan.
More info on buying and leasing a vehicle: Kelley Blue Book: Car Buying vs. Leasing Calculator
Need help evaluating your next big financial move? Contact our office today to schedule a personalized consultation.
written by Nicholas A. Stinson, CFP® , ChFC® , ChSNC®
This is a general communication being provided for informational purposes only. Information is educational in nature and not designed to be taken as advice or recommendation for any specific investment product, strategy or service. This material does not constitute sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. CRN202805-8661763
