The Great Auto Debate: Leasing vs. Buying
Should you lease your next car or purchase it? While leasing offers lower monthly payments, buying builds equity. The right choice depends on your driving habits and financial goals.
The Breakdown: How Each Option Works
Buying a Car 🛒
- You take out an auto loan to cover the full purchase price.
- You own the vehicle once the loan is paid off.
- Costs: Higher monthly payments, but you keep the car's residual value when you sell it.
Leasing a Car 🔑
- You pay for the vehicle's depreciation over a set period (typically 36 months).
- You return the car or buy it out at the lease end.
- Costs: Lower monthly payments, drive-off fees, and potential mileage overage fees.
Key Terms to Know
- Residual Value: The estimated worth of the car at the end of the lease. A higher residual value means lower monthly lease payments.
- Money Factor: The interest rate on a lease. Multiply it by 2,400 to get the equivalent APR.
- Mileage Allowance: The maximum miles you can drive annually (typically 10,000 to 15,000) without paying overage fees (typically $0.15 to $0.25 per mile).
Action Plan: Compare the Net Costs
Use our US Car Lease vs. Buy Calculator to model both options over the same timeframe, factoring in interest rates, depreciation, and mileage to find the cheapest route.
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