What is the difference between leasing and buying a car

To get a sense of how the costs differ when you drive off the lot, consider the breakdown below that shows the costs of leasing or buying a Toyota Camry over a six-year period. This also assumes you find the exact same three-year lease deal twice in a row and make the same initial payment. These figures do not include tax, title, license and registration fees.

Determining whether you should lease or buy a car depends on a careful assessment of your personal finances and your driving habits. Think about how much you can comfortably afford to pay upfront and each month, and consider how many miles you spend on the road to figure out the most cost-effective way to hit the highway.

Buy calculator to figure out the best financial move. How We Make Money. David McMillin. Written by. David McMillin writes about credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.

Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. Leasing a car When you lease a car, you pay for the right to drive the vehicle for a fixed period of time — typically three or four years.

Pros Cons Lower monthly payments Mileage restrictions Lower drive-off-the-lot fees potentially no down payment Potential for extra fees early termination, mile overages and a range of other unexpected costs in the fine print Ability to drive the latest model Additional insurance coverage is necessary Warranty protection through the lease term typically three years or 36, miles The need to get a new car at the end of the term.

Pros Cons No mileage limits Higher monthly payments No wear-and-tear charges Bigger down payment required The ability to sell or trade in the vehicle Long-term maintenance costs. Read more From David. You may also like 9 questions to ask before leasing a car. Should you lease and then buy a car? Potential for extra fees early termination, mile overages and a range of other unexpected costs in the fine print. Trade-In Value Estimator.

Best New Car Deals. To find out whether leasing or buying is right for you, we take a look at the pros and cons. The Upside of Leasing. The Major Advantages of Leasing You drive the car during its most trouble-free years. You're always driving a late-model vehicle that's usually covered by the manufacturer's new-car warranty.

The lease may even include free oil changes and other scheduled maintenance. You can drive a higher-priced, better-equipped vehicle than you might otherwise be able to afford. Your vehicle will have the latest active safety features. You don't have to worry about fluctuations in the car's trade-in value or go through the hassle of selling it when it's time to move on. There could be significant tax advantages for business owners. At the end you just drop off the car at the dealer.

Disadvantages to Leasing. An Alternative to Long Loans. Difficult Comparison. For savings upfront and over the long haul, buy used. And pay cash. How Loans and Leases Differ. Below are some of the major differences between buying and leasing. Buying Leasing Ownership You own the vehicle and get to keep it as long as you want it. You get to use it but must return it at the end of the lease unless you decide to buy it.

Up-Front Costs They include the cash price or a down payment, taxes, registration, and other fees. Early Termination You can sell or trade in your vehicle at any time. If necessary, money from the sale can be used to pay off any loan balance.

If you end the lease early, charges can be as costly as sticking with the contract. On occasion a dealer may buy the car from the leasing company as a trade-in, letting you off the hook. You return the vehicle at lease-end, pay any end-of-lease costs, and walk away. Future Value The vehicle will depreciate, but its cash value is yours to use as you like. Most leases limit the number of miles you may drive, often 10, to 12, per year.

You can negotiate a higher mileage limit. However, as a general rule, consider your lifestyle, needs, and preferences when making this decision. Simply put, leasing allows you to get more car for less money, since you only pay for the value of the vehicle that you drive instead of paying for the entire value of the vehicle.

On the other hand, buying gives you the freedom of complete ownership and the ability to pay off the vehicle and build up credit when it comes time to buy a new one. Ultimately, it is up to you to weigh the pros and cons of both financing options and determine which method best fits your needs and suits your lifestyle.

Visit Jack Ingram Nissan to browse our inventory or schedule a test drive online with us! Saved 0. Viewed 0. New Used Call Service. Jack Ingram Nissan put together some information about the differences between buying and leasing to help you make a confident, informed decision about your next vehicle purchase.