Should I Lease or Buy a Car?

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Should I Lease or Buy a Car?

Itching to hop in a new ride but not sure if you should lease or buy your car? Leasing allows you to drive a car for a limited period of time, but you won't own the car. Buying is usually more of a long-term choice. You purchase the car in one go or open an auto loan with the goal of eventually owning the car. Similar to the struggle between renting or buying a home, your decision will depend on various factors and lifestyle choices. Each option comes with its respective upsides and downsides, so if you're shopping for cars, read on!

Should I Lease?


  • Generally lower monthly payments. Since you're not buying the car, but a certain amount of time using it instead, your monthly payment usually will be based off the depreciation of the car, or how much value the car loses, during the time you're leasing it. So if the initial price tag is $25,000, but your car is estimated to be worth only $12,500 after your lease is up, your monthly payments will be based primarily on the lost value of $12,500. For a three-year lease, the payment amount would then start at $347, in our hypothetical example. The final number would depend on additional factors like the length of your lease, interest rates, taxes and other fees.
  • Flexibility. If you're the type of person who often moves great distances for work or by choice, factoring your car into the relocation can be a pain. For long moves, you may have to consider the costs of shipping your car to your new location and the hassle of finding a neighborhood with convenient street parking. But with a lease and a relatively short loan period that typically lasts three years, you have the freedom to turn in your car at the end of the lease and take off with no baggage on your shoulders.
  • Newer cars. Every time your lease ends, you get to go out into the market and take a new car for a spin. You'll have something fresh and fun to test out every few years. Three years is also typically how long the car's warranty will last, so any necessary repairs are usually covered during your lease.


  • Extra charges. Leases often come with certain extra charges that wouldn't apply if you were buying a car. For example, lease contracts come with mileage limits, which typically range from 9,000 to 15,000 miles per year. If you go over your limit, you could be charged high per mile fees like 20 cents per mile. Finally, if you do ever want to cut your lease short, most leases come with heavy early termination fees.
  • Higher insurance rates. Most leases will require gap insurance as part of the overall insurance coverage, which covers what's still owed on the lease at the time of an accident. This insurance generally only protects you if the accident creates a complete loss though. Sometimes, such insurance costs may be built into lease contracts, so it's something to consider and watch out for.

Should I Buy?


  • Equity. This is probably the biggest benefit of buying a car. When you buy in cash or make that last payment on your auto loan, you have something to show for it. If you wanted to, though, you could also sell your car off for whatever it's worth when you're done with it. That choice is yours to make.
  • Freedom. If you commute long distances every day for work, you won't have to worry about a mileage limit stopping you from racking up miles. And you can give your car a shiny new paint job anytime you want. Go ahead and trick out your car.


  • Loan and maintenance payments. For those who can't buy a car outright, auto loans typically come with higher down payments, which could be about 10 to 20 percent of the total cost. You also will probably be responsible (outside the warranty coverage) for maintenance fees as your car gradually wears down.
  • The hassle of selling. If you don't pass your car on to a friend or family member, you'll likely have to sell it eventually and deal with the headache of finding and negotiating with buyers. Sure, you'll make some of your money back, but many people find the process stressful.
  • Longer loan period. If you want an auto loan with lower monthly payments, it may take upwards of five years to pay it off, which gives lenders more time to charge you interest.

Bottom Line

Financing a car is one of the biggest decisions you'll most likely have to make. You could easily pull your hair out deciding which option is right for you, but when it comes down to it, your decision to lease or buy a car depends on your personal financial situation. Think about what features matter the most in your life and how you want to approach your budget. Some would say that buying a car makes more financial sense over time, but if you prefer driving new cars and can keep them in good condition, you might lean towards leasing. It's all in the eye of the beholder.

About the Author:Charmaine Ng is the Communications Coordinator at Credit Karma. When she isn't writing her way through life, you can find her reading about the latest in entertainment and watching television almost every night of the week. Say "hi" @noodlemaine!

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What Bank or Issuer are you talking about,  "Editorial Note: The editorial content on this site is not provided by the bank or issuer. "  Is CreditKarma a Bank now?

Add the following to Lease Con's,   You still have maintenance no matter what.  

When Buying a Car,  "The hassle of selling." is not a Con.

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Hey ichuhowie, thanks for sharing your opinions. We're referring to the banks and issuers that we partner with. You'll see this disclosure on articles where we link to recommended offers from our partners.

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