When to Lease and When to Buy a Car

Deciding whether to lease or buy a car depends entirely on individual financial situations and lifestyle preferences. Leasing offers lower monthly payments and the flexibility to drive a new car every few years, while buying means long-term ownership and no restrictions on what you do with the car both during your ownership and when you want to move onto another vehicle.

Pros of leasing

• Generally lower initial payments (can be as little as one months' payment).
• Usually lower monthly payments, as you only pay for the car's depreciation during the lease.
• Maintenance and repairs are often covered by the manufacturer's warranty and optional maintenance packages can be included.

• No risk to you; the leasing company absorbs the loss in value.
• No hassling of selling at the end of the lease, simply return the car.

Pros of ownership

• Complete freedom to modify the car, sell it at any time, or keep it for as long as you like.
• You have an asset to sell or trade in, potentially building equity.
• No mileage restrictions; you can drive as much as you want.

Cons of leasing

• You never own the car; it is a long-term rental.
• Strict annual mileage limits apply, with penalties for exceeding them.
• Limited ability to modify the vehicle.
• Tied into a fixed contract (early termination can be expensive).

Cons of ownership

• Typically requires a larger down payment/initial outlay.
• If via monthly payments, they're usually higher than leasing, as you are paying for the full value of the car.
• You're responsible for all maintenance, servicing, and repairs, which increase as the car ages.
• You absorb the depreciation risk, which affects the resale value.

When leasing a car makes the best sense

• Enjoy driving a brand-new car every few years with the latest technology and safety features.
• Prefer lower, fixed monthly payments and minimal upfront costs.
• Drive a consistent, low annual mileage within the contract limits (typically 10,000-15,000 miles per year).
• Don't want the hassle of selling the car later or worrying about its depreciation. 

When buying a car is the right choice

• Want to own an asset and build equity in the vehicle over time.
• Plan to keep the car for a long period (5+ years).
• Drive a high annual mileage and want to avoid excess mileage fees.
• Desire the freedom to modify the car or use it without condition restrictions.