Leasing vs. Buying a Car: Pros and Cons

When you lease a car, you pay to use it and return it once the lease term is up. This often means lower monthly payments, but leasing can be more expensive than buying a car since you won’t be able to sell your car or use it as a trade-in for your next purchase. Buying a car means owning it outright — once you’ve repaid your loan — and can drive it for years after your monthly payments finish.

If you’re deciding between the two, balance your desire for top-of-the-line tech and a reasonable monthly payment against the long-term benefits of owning a car.

Is it better to lease or buy a car?

Leasing and buying are both valid ways to get your hands on a new vehicle, but buying offers fewer restrictions than leasing on how much you can drive and what you can do with the vehicle. Plus, you’ll own the car at the end of the loan. Leasing is a less expensive option, month-to-month, especially if you want to drive a luxury car. You won’t own the car at the end of the lease period, and depending on the terms of your contract, you may also need to pay additional fees.

Your credit score affects your loan terms and how much you spend overall. In the second quarter of 2025, Experian’s State of the Auto Finance Market report shows that:

• The average lease payment for subprime borrowers (scores between 501 and 600) was $620. Super-prime borrowers (scores between 781 and 850) saw a slightly lower average payment of $616.
• The average monthly payment for used auto loans was $547 for subprime borrowers and $525 for super-prime borrowers.
• New car loans had a similar difference, with subprime borrowers paying $777 per month compared to the $728 paid by super-prime borrowers.
• The majority of loans and leases (84.89 percent) go to borrowers with credit scores of 600 or higher.

The decision to lease or buy also depends on several other factors, including the miles you expect to drive annually, the amount of money you’re willing to spend and the vehicle’s purpose. Use a calculator to compare leases and loans to decide which option is right for your budget.

Leasing vs. buying a car: Bankrate’s math

This example is based on a new 2025 Toyota Camry, one of the top-selling vehicles in the U.S., which has an MSRP of around $35,000.

To calculate the cost of a lease, Bankrate staff chose a standard 36-month term and a $1,000 down payment. Based on average rates of depreciation and the average annual mileage for a driver in the U.S. (12,200 miles), the car will be worth about $23,100 at the end of its lease. Using the Bankrate auto lease calculator, monthly payments would be around $538.

To calculate the cost of buying the same car, we assumed a 20 percent down payment of $7,000, a 36-month term and a 6.70 percent APR. The Bankrate auto loan calculator shows that monthly payments would be $861.

While a lease may be a better option if you’re only concerned about your monthly payment, a loan lets you keep your car well past that three-year mark. And the longer you own your car, the longer you can put that money aside for savings or investments.

Pros and cons of leasing a car

When you lease a car, you pay to drive it for a fixed period, typically three or four years. Most leases are financed through the dealership or manufacturer’s captive finance company, but there are also ways to take over a lease or lease a used vehicle.

You’ll need to pay taxes, title fees, licensing fees, dealer documentation fees and prep charges at lease signing. Depending on a few factors, you may need to make a deposit. The lease may also come with an acquisition fee or a drive-off fee. This list of fees can quickly add up to thousands of dollars.

From there, you will make monthly payments over the life of the lease to cover the costs of the vehicle’s depreciation. There are typically restrictions on how many miles you can drive the car during the lease term, commonly 12,000 miles to 15,000 miles a year.

At the end of your lease, be prepared to pay for excessive scratches, door dings, dents, interior stains, rips in the upholstery or damage from accidents. It may be less expensive to fix the damage yourself before turning in the car rather than waiting for the leasing company’s charges for the same repairs.

Benefits of leasing a car

• Leasing a new car typically costs less month-to-month than buying one.
• You may be able to drive off the lot with a low down payment, especially if you find a special lease offer.
• Warranty protection typically covers the first three years or 36,000 miles.
• You don’t have to worry about depreciation or trade-in value.

Drawbacks of leasing a car

• Most leases have annual mileage restrictions, typically between 12,000 and 15,000 miles annually. Overage charges can be steep.
• You can’t make changes or customizations to the vehicle — it must be returned in the same condition you received it. Excess wear charges can be steep.
• Terminating a lease early is expensive, but a cheaper alternative is a lease transfer — provided you can find someone to take over your lease.
• Despite making payments, you’ll never own the vehicle.

When is leasing a car a good idea?

Leasing may be the right option if you want to get behind the wheel of a vehicle without a substantial financial commitment upfront. It makes the monthly cost more manageable while allowing you to drive a more luxurious vehicle than you might otherwise be able to afford.

But keep in mind the mileage restrictions and potential excess wear-and-tear charges associated with leasing. If you like long road trips or want to customize your car with a new paint job, leasing might not be right for you.

Pros and cons of buying a car

When you buy a vehicle, each monthly payment you make builds equity. When the loan is paid in full, you own the vehicle outright. Purchasing a vehicle gives you greater control over how it’s used — you can customize it to your liking, drive more miles and sell it or trade it in at any time.

But because you’re paying for the whole vehicle, not just its short-term use, you’ll face higher upfront costs and monthly payments. But the longer you drive the car, the greater your return on investment. That’s why it’s less expensive in the long run to buy versus lease — there will come a day when you’re done paying for the car, but if you lease, you’ll always have a payment.

Benefits of buying a car

• There are no mileage restrictions, so you can drive as much as you want without extra fees.
• You won’t have to worry about what a dealer deems normal wear and tear.
• After you pay it off, you can continue driving it, sell your car or trade it in to upgrade to a newer model.
• Overall costs tend to be lower, especially if you continue driving the vehicle after it’s paid off.

Drawbacks of buying a car

• Monthly auto loan payments are typically higher than lease payments.
• Larger down payments are typically expected for vehicle purchases, sometimes as much as 20 percent of the purchase price.
• A car is a depreciating asset and can lose an average of 20 percent of its value in the first year, and about half of its value within the first five years.
• Owning a car means paying to fix it when something breaks because the warranty doesn’t cover everything and won’t last forever.

When is buying a car a good idea?

If you plan to drive the vehicle for several years and want to minimize your total out-of-pocket costs, buying might be best. Buying also gives you the flexibility to customize the car to your taste or take long road trips without worrying about mileage.

Although buying or financing your vehicle with a loan takes some extra homework, you will have full control of the vehicle and can sell or trade it in at any time — a benefit that leasing can’t offer.

Bottom line

Determining whether you should lease or buy a car depends on a careful assessment of your finances and driving habits. Consider how much you can comfortably afford to pay each month, how many miles you typically spend on the road and how important it is to always be driving a late model car.

When you know the type of car you want, crunch the numbers with a lease versus buy calculator. Also, shop around for financing and compare your rates to ensure you make the best financial move.