What should I know about leasing versus buying a car? | Consumer Financial Protection Bureau (2024)

FAQs

What factors should a consumer consider before buying or leasing a car? ›

More expensive in the long run: If you buy a car and pay off the loan, you can keep it as long as it runs without another monthly payment. If you decide to lease all your vehicles, though, you may end up paying more in the long term because you'll always have a monthly payment.

Buying a car means that you own the vehicle once your payments have been made. A lease is an agreement to use a vehicle, new or used, for a certain number of months and miles.

On the downside, when you lease a vehicle you're not building any equity: you're essentially paying the interest to finance a loan and pay off the value depreciation. It's like a really long rental period instead of owning the vehicle.

Most lease drivers often return the car, but you have several end-of-lease options. You can buy out the lease before the contract ends or purchase the vehicle at the end of leasing. Then, you can sell the car once you own it.

In 2024, whether to buy or lease a car depends on your individual needs and lifestyle. With manufacturers pushing more attractive lease deals, leasing may become a more appealing option for many. Leasing is a great way to avoid the worst effects of today's high interest rates.

Your budget should be a primary consideration when deciding whether to lease or buy a car. Remember to compare both the average monthly costs and the lifetime expense of buying vs. leasing a vehicle.

You should consider your financing options when deciding whether to buy your leased car. If it's possible to secure a low-interest loan or pay cash, buying the car may make sense. However, if the financing options are not favorable, buying the car may not be a good financial decision.

Which questions should someone ask when deciding whether to lease or buy a car? ›

Will I use it more than the allowed lease mileage? How long do I want the car? How much do I want to spend?

Leased cars are restricted to a limited number of miles

Every lease agreement has a stated number of miles you're allowed to drive without paying a penalty. This limit typically is 12,000 to 15,000 miles. If you exceed your limit, you'll be hit with an excess mileage penalty that can add up fast.

The Upside of Leasing

Monthly payments are usually lower because you're not paying back any principal. Instead, you're just borrowing and repaying the difference between the car's value when new and the car's residual—its expected value when the lease ends—plus finance charges.

You're a Low-Mileage Driver

If you typically log between 10,000 and 15,000 miles per year, leasing a car might make more sense than purchasing one. Just be aware that if you exceed the mileage listed in your contract, you could be charged a hefty fine at the end of your term.

Leasing vs buying depends on a variety of factors, such as its financial situation, industry, and growth plans. Whether to lease or buy assets is a strategic decision that can significantly impact a company's financial performance.

Leasing a car means you'll have lower monthly payments and you can typically drive a vehicle that may be more expensive than you could afford to buy. On the other hand, if you decide to buy a car, you'll own it in the end, even if it means you'll pay a higher monthly loan payment in the meantime.