Buying Vs. Leasing a Car: What’s the Difference?

Life Stages
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5
 Min read
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March 8, 2022

When you need a new vehicle, there are a lot of things to think about including what type of vehicle you want, as well as what you can afford. You’ll also need to figure out how you’ll go about paying for it once you have an idea of what you’re looking for. Let’s look into buying vs. leasing a car: what’s the difference?

Buying a Car

For most people, buying a car involves applying for a car loan through a bank, credit union, or other finance company. You’ll pay a down payment along with taxes and other fees, and you’ll commit to making payments for a certain number of years until it’s paid off. Part of each payment goes toward interest and the rest goes toward paying down the balance you owe. Once you get to the end of the payment term, you own the car.

Leasing a Car

When you lease a car, you pay for the right to drive it for a few years. You’ll pay an initial deposit, which includes taxes and fees, and you’ll make monthly payments to cover the cost of the vehicle’s depreciation. Once your lease ends, you’ll have the option to buy the vehicle at a pre-arranged price or return it to the dealer.

Pros and Cons of Leasing

Many people enjoy leasing vehicles because it gives them a chance to drive a car with the newest technology. Payments on a lease are usually lower than on a car loan, which may be helpful in the short term, but at the end of your lease, you won’t own the vehicle. You’ll have to start a new lease or buy a vehicle at that point, and you won’t be free of monthly payments. 

You will have to pay a penalty if you get tired of the vehicle and want to break the lease, and you may be on the hook to cover damages to the vehicle that are considered excess wear and tear. There are annual mileage restrictions, which are usually between 10,000 and 15,000, and if you go over the limit, you have to pay a premium for excess mileage.

Pros and Cons of Buying

The payments on buying a car are often higher than leasing, but you’re investing in something that’s ultimately yours. You have the freedom to customize the car if you want to or to sell it or trade it in. There’s no limit on the number of miles you can drive, but if you do put a lot of miles on your vehicle, it may lower its resale value. Once you reach the end of the loan term, you own the car and therefore have no more car payments.

Protecting Your Credit

Whether you decide to buy or lease, having good credit gets you the best deals. Protect your credit by always paying your bills on time and don’t overborrow. Check your credit report at least annually to make sure everything on it is accurate. Dovly is an automated credit repair engine that can help you dispute any errors you find. Try it risk-free with our free membership tier. Contact Dovly today.

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