Financing vs. Leasing a Vehicle

by Kelly

When you decide to get a new car, you can either choose to finance or lease. Both options require you to make a monthly payment, but financing will come with higher payments, while leasing requires you to return the vehicle at the end of the term. There are advantages and disadvantages to both options, and you must decide which option suits your situation.

Monthly payment

One of the most significant differences is how much you’ll pay every month. A lease tends to require you to pay the price of the depreciation of the vehicle while you drive it. This leads to lower payments, and in some options, is the only way that you can qualify to drive a car. You have more flexibility in deciding which car to drive since your budget stretches further. Leases also tend to require a smaller down payment.

Down payment

Buying an automobile requires you to pay a percentage of the purchase price before you can drive off the lot. You’re also responsible for taxes, registration, and other fees associated with getting a loan. Leasing can be an option if you have less money to put down initially. Dealerships run specials all the time advertising no money down or only require a couple of thousand dollars down to qualify. Remember that the more money you put down, the lower your monthly payment will be.


A lease means that you’ll always have a monthly payment since you trade one vehicle in and get a different one. If you finance a car, you’ll own it at the end of the loan and be free of monthly payments. If you like to have the newest models, features, and gadgets, a lease can be an option to give you something fresh to drive every few years. Most lease contracts last for 36 months.

Limits on use

Owning your car means you’re free to do anything with it from the time you drive it off the lot. Drive it across the country and don’t have a heart attack if someone happens to spill a drink since you don’t have to worry about paying a fee. A lease requires you to keep the car in excellent condition, and if you turn it in with damages, you’ll have to pay for the damages when you turn it in. Carefully read your contract to ensure you don’t break the terms of your lease. Be mindful of mileage limitations.

You can only drive a leased vehicle for a certain amount of miles during the term, or you’ll be subjected to additional fees for every mile over the contract limit. A typical lease allows for 9,000 to 15,000 miles per year, so watch the odometer carefully and plan. Stick with financing if you have a long commute or think that you won’t be able to stay within the limitations.


Owning a vehicle lets you customize it any way you please. Paint decals, add lights, change the radio, install your backup camera, or install a new sound system. Leasing a vehicle eliminates those options because you aren’t allowed to make significant modifications. You can add seat covers and floor mats to personalize it a bit, but stick to financing an automobile if you’re trying to make your car stand out.

Take a look at your financial situation and needs in a vehicle, and then decide whether you want to lease or finance. Long at the overall long-term picture before making your decision. It’s something you’ll have to stick with for the next three, or more, years.