Leasing vs buying a car: Pros & cons

Check out our pros and cons list to help you make an informed decision.

A couple is sitting in a car with the salesperson looking in the window and discussing leasing or buying the vehicle.

There are many factors that can go into the decision of whether to lease or buy a car, truck or SUV. A primary consideration is how you intend to use the new vehicle. Is it an addition to your current fleet? Or is it replacing an older vehicle? Another factor to weigh is whether or not the vehicle will be used as a daily commute driver, or more likely to be what we all know as a "grocery-getter"?

Then there's the vehicle for a new family teen driver, or one headed off to college. These are often used car purchases and, by default, not necessarily a lease option.

All of these questions should be addressed before you begin your search for a new or used car, truck or SUV.

In general, some people prefer the convenience a lease offers in being able to walk away from the vehicle after a certain amount of time. There are restrictions, however, such as annual mileage and wear-and-tear on the leased vehicle.

Others enjoy the idea of eventually owning the vehicle outright. There's something to be said for having the option of one day being able to use the equity in your purchased car, truck or SUV when you go to trade for a new one. Either way, your credit and budget will factor into this decision.

  Buying Leasing
Payments Cash in full or monthly loan payments Monthly for fixed time period
Ownership Yours after loan is paid off Dealer
Terms Average loan term: 69 months Average lease term: 36 months

Pros and cons with buying and leasing

Pros with buying

  • The ability to customize the vehicle.
  • Flexibility to sell when you want.
  • Eventually you will be payment free.
  • Lower your insurance premiums.

Cons with buying

  • Trade-in and selling hassles
  • Higher maintenance costs
  • Rapid depreciation : 10% to 20% each year

Pros with Leasing

  • Lower average monthly payments than an auto loan
  • Lower down payment
  • Taxes – No upfront sales tax payment and there may be tax advantages for business use
  • Ability to own a new car every few years
  • Most repairs are covered by the factory warranty

Cons with Leasing

  • Limited mileage – typically 12,500 to 15,000 per year
  • Early termination can be costly
  • Potential penalties for general wear and tear

Some other important considerations

How long do I want to keep the vehicle?

  • How many miles do I drive annually?
  • What is my monthly budget?
  • Can I afford higher insurance premiums?
  • Will my lifestyle choices, such as pets or children, affect the car's condition?

Calculate the difference

Use this handy buy or lease a car calculator to help you arrive at your decision on whether it's better to lease or buy a car, truck or SUV.

Above all, avoid overextending yourself. Whether you end up leasing or buying that new car, there are far too many temptations to go for more vehicle than you truly can afford. Go in with a clear plan and budget and stick to it!

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
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