Is it Better to Lease or Buy a New Car?

Getting a new car is a big decision that depends on several factors, including your budget, lifestyle and priorities. If you’re in the market for a new car, you might wonder whether you should lease or buy it. To help you make the best choice for your situation, this article will explore the differences between leasing and buying and break down the pros and cons of each option.

What’s the difference between leasing and buying?

Both leasing and buying options allow you to get a car that fits your daily needs. However, there are several noteworthy differences between these two options.

Leasing

A lease is a long-term rental. Once you sign a lease agreement, you commit to making monthly payments in exchange for the ability to drive the car for a set period, usually between two and four years.¹ Your lease agreement will outline key details, such as the mileage limit for the car, which is the number of miles you can drive the car during a defined period, the per-mile fee you will pay if you exceed the mileage limit and any other fees you could expect to pay. After your lease comes to an end, you may have a choice to return the vehicle, extend the agreement or buy the car.

Buying

When you purchase a car, you own it outright, either immediately if you pay the full purchase price, or eventually once you pay off your auto loan. With an auto loan, you agree to pay back a fixed amount of money every month, plus interest, until the loan is paid off. When you get an auto loan, the lender places a lien on the car, which means they have a legal claim to the vehicle until the car loan is paid off. You can still customize the car to fit your needs and won’t have to stick to a mileage limit defined by a lease. You typically must pay off a lien if you want to sell or trade in your car.

Pros and cons of leasing a car

Just like any financial decision, leasing a car has benefits and drawbacks that are important to consider.

Pros

Let’s take a look at some of the positives of leasing a car.

Lower monthly payments than loans

In general, lease payments are less than car loan payments for the same vehicle, because lease payments are based on the car’s depreciation, or loss of value, during the lease term, rather than the full purchase price. Leasing could give you access to a vehicle that you might not be able to afford otherwise.

Drive a new car every few years

If you enjoy driving a new vehicle every few years, a lease could provide you with the flexibility you need. Once your lease ends, typically after two to four years, you could return the car and choose a new one to try something different or better accommodate your lifestyle.

Less maintenance hassle (often under warranty)

Most lease agreements include warranty coverage for around three years, meaning you won’t have to spend a lot if you need repairs and for routing maintenance.² Also, since you’ll only drive the vehicle for a few years, you may be able to avoid high maintenance costs for new tires or other major services.

Cons

There are also some downsides to be aware of if you’re considering leasing a car.

No ownership

While a lease usually offers lower monthly payments than a car loan, it’s typically more expensive in the long run. With a lease, you won’t build any equity, which is the value of the car minus the amount you’d still owe on the car loan. If you are in the habit of leasing new vehicles every few years, you’ll always have monthly payments without owning a vehicle outright.

Mileage limits and wear-and-tear charges

When you lease a vehicle, you’ll have to adhere to mileage limits, which could range from 12,000 to 15,000 miles per year.³ If you exceed your limit, you are typically on the hook for additional fees. You may also be charged other fees if you return your leased car with dents, scrapes or damage beyond what’s considered normal wear and tear.

Fees for early termination

Since typical lease terms are between two to four years, you’ll likely have to pay early termination penalties if you decide to end your lease before your term ends. Depending on your agreement, you might be able to trade in your vehicle to avoid them, but this isn’t always an option.

Pros and cons of buying a car

Buying a new car has its own set of advantages and disadvantages that you should weigh before you decide.

Pros

There are a few benefits to buying a car that you won’t get from leasing.

You own the car once the loan is paid

After you pay for the vehicle in cash or repay your car loan in full, you will own it outright. You may continue to drive it for as long as you like, sell it or eventually trade it in to upgrade to a newer or different model.

No mileage limits

When you buy a car, you won’t have to worry about mileage limits. You will be able to drive it as often as you’d like without paying additional fees, which is a huge plus if you drive a lot for work or personal reasons.

Potential for long-term savings

Even though lease payments are typically lower than car loan payments, they don’t help you build equity or an ownership interest in a vehicle. As a result, buying tends to be a better long-run choice, especially if you know you’ll drive your car for a while after your loan is paid off.

Cons

Likewise, buying a car has some drawbacks to consider.

Higher monthly payments

As of June 2025, the average cost of a new car is $48,699.⁴ Your monthly car payments may be high, depending on the make and model of your vehicle, particularly if you only make a small down payment.

Maintenance costs after the warranty ends

While your new car will likely come with a warranty, that warranty won’t last forever. Once it ends — typically after three years or 36,000 miles of driving, whichever comes first — you’ll have to cover not just routine maintenance services, like oil changes and tire rotations, but big repair services, such as transmission repairs or suspension system replacement, out of pocket. If you want to purchase an extended warranty after the manufacturer’s warranty expires, you’ll generally need to pay an upfront fee and meet a deductible before the work is covered.⁵

Depreciation over time

A car is a depreciating asset, meaning its monetary value will go down over time. New cars can lose up to 20% of their value in the first year.⁶ If you sell your car, you might not get as much in return as what you originally paid for it.

Which option fits your needs?

Your budget, lifestyle and driving habits will help determine whether it makes more sense to lease or buy a car.

Leasing may be right for you if...

• You like driving a new car every few years: If you don’t like to drive the same vehicle for too long, a lease may be a better option since it allows you to try a new car every two to four years.
• You drive a predictable number of miles: Leasing may be a good option if you know you won’t go over the mileage limit. If you don’t drive often or have a good idea of how many miles you drive every year, it could be worth exploring.
• You want lower monthly payments: Compared to a car loan, a lease may offer more affordable monthly payments. You’ll also likely pay less for maintenance than you would for a car you bought. Depending on your budget and goals, a lease may make sense for your needs.

Buying may be right for you if...

• You plan to keep the car long-term: If you know you want to commit to a vehicle you’ll have for many years, buying is ideal, as it’s a better long-term investment. Once you pay off your loan, you’ll own the car free and clear and won’t have to worry about monthly payments.
• You drive a lot or have unpredictable mileage: Buying is a solid choice if you’re a frequent driver or you’re unsure how many miles you’ll drive. Unlike leasing, there are no mileage restrictions.
• You prefer to build equity in an asset: When you buy a car, you’ll build equity as you repay your loan, which could give you the freedom to eventually sell or trade in your vehicle.

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Drive away with the right fit

There is no one-size-fits-all answer to whether it’s better to lease or buy a new car. Since both options come with their pros and cons, the right move depends on your budget and personal preferences.

While buying is usually ideal if you prefer to drive your car for the long haul without mileage restrictions, leasing might be a better choice if you like the flexibility of driving a new car every few years and prefer possibly lower monthly payments. Carefully weigh your options and make the decision that’s right for you.

Sources:

1. https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/
2. https://www.caranddriver.com/auto-loans/a44077328/what-happens-to-warranty-after-lease-buyout/
3. https://www.federalreserve.gov/pubs/leasing/resource/different/mileage.htm
4. https://www.kbb.com/car-advice/when-will-car-prices-drop/
5. https://www.kbb.com/car-advice/car-warranty-guide/
6. https://www.kbb.com/car-advice/how-to-beat-car-depreciation/