Should You Buy or Lease Your Next Vehicle?

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Categories: Blog, June 2016, Monthly Newsletter, Planning

Buying considerations Leasing considerations
Ownership When the vehicle is paid for, it’s
yours. You can keep it as long as you
want, and any retained value (equity)
is yours to keep.
You don’t own the car–the leasing
company does. You must return the
vehicle at the end of the lease or
choose to buy it at a predetermined
residual value; you have no equity.
Monthly payments You will have a monthly payment if
you finance it; the payment will vary
based on the amount financed, the
interest rate, and the loan term.
When comparing similar vehicles
with equal costs, the monthly
payment for a lease is typically
significantly lower than a loan
payment. This may enable you to
drive a more expensive vehicle.
Mileage Drive as many miles as you want; a
vehicle with higher mileage, though,
may be worth less when you trade in
or sell your vehicle.
Your lease will spell out how many
miles you can drive before excess
mileage charges apply (typical
mileage limits range from 12,000 to
Maintenance When you sell your vehicle, condition
matters, so you may receive less if it
hasn’t been well maintained. As your
vehicle ages, repair bills may be
greater, something you generally
won’t encounter if you lease.
You generally have to service the
vehicle according to the
manufacturer’s recommendations.
You’ll also need to return your
vehicle with normal wear and tear
(according to the leasing company’s
definition), so you may be charged
for dents and scratches that seem
Up-front costs These may include the total
negotiated cost of the vehicle (or a
down payment on that cost), taxes,
title, and insurance.
Inception fees may include an
acquisition fee, a capitalized cost
reduction amount (down payment),
security deposit, first month’s
payment, taxes, and title fees.
Value You’ll need to consider resale value.
All vehicles depreciate, but some
depreciate faster than others. If you
decide to trade in or sell the vehicle,
any value left will be money in your
pocket, so it may pay off to choose a
vehicle that holds its value.
A vehicle that holds its value is
generally less expensive to lease
because your payment is based on
the predicted depreciation. And
because you’re returning it at the end
of the lease, you don’t need to worry
about owning a depreciating asset.
Insurance If your vehicle is financed, the lien
holder may require you to carry a
certain amount of insurance;
otherwise, the amount of insurance
you’ll need will depend on personal
factors and state insurance
You’ll be required to carry a certain
amount of insurance, sometimes
more than if you bought the vehicle.
Many leases require GAP insurance
that covers the difference between
an insurance payout and the
vehicle’s value if your vehicle is
stolen or totaled. GAP insurance may
be included in the lease.
The end of the
You may want to sell or trade in the
vehicle, but the timing is up to you. If
you want, you can keep the vehicle
for many years, or sell it whenever
you need the cash.
At the end of the lease, you must
return the vehicle or opt to buy it
according to the lease terms.
Returning the vehicle early may be
an option, but it’s likely you’ll pay a
hefty fee to do so. If you still need a
vehicle, you’ll need to start the
leasing (or buying) process all over.


After declining dramatically a few years ago, auto sales are up, leasing offers are back, and incentives and deals abound. So if you’re in the market for a new vehicle, should you buy it or lease it? To decide, you’ll need to consider how each option fits into your lifestyle and your budget. This chart shows some points to compare.


Buying or leasing tips


  • Shop wisely. Advertised deals may be too good to be true once you read the fine print. To qualify for the deal, you may need to meet certain requirements, or pay more money up front.
  • To get the best deal, be prepared to negotiate the price of the vehicle and the terms of any loan or lease offer.
  • Read any contract you’re asked to sign, and make sure you understand any terms or conditions.
  • Calculate both the short-term and long-term costs associated with each option