Automobile lease vs. buy: Which option is better for fall buyers
For many drivers, buying a car with a traditional auto loan is the better long-term financial move. Buying may be a better fit if you want to:
- Build equity in your vehicle.
- Drive payment-free after your loan is paid off.
- Keep, sell or trade in the vehicle whenever you choose.
Leasing usually offers lower upfront costs and monthly payments, but comes with tradeoffs. See how car leasing vs buying compares.
Choosing how to pay for your next vehicle is just as important as choosing the vehicle itself.
While buying with an auto loan is often the better long-term financial decision, leasing can make sense in certain situations. The key to answering the automobile lease vs. buy question is understanding what you’re paying for, how long you plan to keep the vehicle, and whether lower lease payments are worth the tradeoffs.
Here’s how leasing vs buying compare.
Is it better to lease or buy a car?
For many people, buying a car with an auto loan offers greater long-term financial value. Buying may mean higher monthly payments and upfront costs, but each payment moves you closer to owning the vehicle.
Once the loan is paid off, you can continue driving the car without a monthly car payment. For example, if your monthly payment is $500 and you continue driving the vehicle for five years after that, you’ll free up about $30,000 that can be redirected toward savings and other financial goals.
Pro tip: Use our free auto loan payment calculator to crunch the numbers for various scenarios. See how a larger down payment can impact your monthly payments, and how a better loan rate can benefit you!
Leasing works differently. Instead of financing the entire purchase price, your payments primarily cover the amount the vehicle is expected to depreciate during the lease term.
Imagine a $40,000 vehicle that’s expected to be worth $24,000 after three years. Your lease payments are largely based on that $16,000 loss in value rather than the full $40,000 purchase price.
However, once your lease ends, many drivers either begin another lease or finance the purchase of the vehicle, extending the amount of time they make monthly payments.
When deciding whether to lease or buy a car, the decision is about more than monthly payments. Here’s what to consider.
| Consideration | Lease | Buy |
| Typical term | 24-36 months | 48-72 months |
| Monthly payment | Often lower because you’re financing the cost of depreciation | Often higher because you’re financing the full car purchase |
| Ownership | Return the vehicle, purchase it, or begin a new lease | Own the vehicle after the loan is paid off |
| Annual mileage restrictions | Typically limited to 10,000-15,000 miles; extra miles often cost 15-30 cents each | No mileage restrictions |
| Excessive wear and tear | Damage beyond normal use may result in lease-end charges | Condition may affect resale value |
| Maintenance | Some leasing companies include limited maintenance, while others don’t | You’re responsible for routine maintenance; some new vehicles include limited maintenance |
| Major repair costs | Many leases end while the vehicle is still under the manufacturer’s warranty, reducing the likelihood of paying for major repairs | Once the warranty expires, you’re generally responsible for repair costs unless you have an extended warranty |
| End of term | Return it, buy it, or start another lease | Keep it, sell it or trade it in |
| Flexibility | Ending a lease early may require early termination fees or paying much of the remaining balance | You can generally sell or trade the vehicle whenever you choose |
| Long-term value | Can cost more if you continually lease new vehicles | Often less expensive over time because you eventually eliminate your monthly payment |
When does leasing a car make sense?
Leasing is often associated with lower monthly payments, but there are several other reasons some drivers prefer it.
- You like driving a newer vehicle: Most leases last two or three years, making it easy to upgrade to the latest model without selling or trading in your current vehicle. Knowing your vehicle is equipped with the latest safety features offers peace of mind for some buyers.
- You drive a predictable number of miles each year: Because most leases include annual mileage limits, consider your daily commute and how often you take longer trips before signing.
- You want lower monthly payments: Because you’re financing expected depreciation instead of the full car purchase price, lease payments are often lower than payments on a conventional auto loan.
- You’re comfortable with the details of a lease agreement: Leasing comes with terms that don’t apply when you buy a vehicle. In addition to mileage limits and potential excessive wear-and-tear charges, it’s important to understand your maintenance responsibilities, insurance requirements, early termination penalties and end-of-lease purchase options before signing.
Should I buy out my lease?
Most leasing companies include the option to purchase the vehicle at lease end for a predetermined price called the residual value. Because this price is set when you sign the lease, it may be higher or lower than the leased vehicle’s market value when the lease ends.
Before making a decision, compare the buyout price with the vehicle’s current market value. Buyout may make sense if the vehicle is worth more than the buyout price, you simply like it and financing the car purchase fits your budget. You also aren’t penalized for going over the mileage or for wear and tear if you buy the leased vehicle.
How to lower a car payment without leasing?
One of the biggest reasons people lease is the lower monthly payment. But leasing isn’t the only way to make vehicle ownership more affordable. Empeople Credit Union offers different programs that can help lower your monthly car payments.
Payment Saver Auto Loan
If your goal is to keep payments affordable while still owning your vehicle, Empeople’s Payment Saver auto loan offers an alternative to leasing.
Payment Saver offers monthly car payments that are typically 30-45% lower than conventional financing, while allowing you to own the vehicle and choose what happens when the loan ends.
At maturity, you can refinance the remaining balance, sell the vehicle, trade it in or pay off the balance and keep driving it. If you decide the vehicle no longer fits your needs, you can also return it at loan maturity.
All-In Member Pricing for lower borrowing costs
All-In Member Pricing at Empeople can also mean lower auto loan rates when you buy a car. Members who meet participation and account activity requirements can receive ongoing interest rate discounts on eligible auto loans each month, helping reduce borrowing costs over the life of the loan. The program also offers higher dividend earnings on qualifying savings accounts.
Whether you decide to lease or buy ultimately depends on your budget, driving habits and long-term financial goals. If lower monthly payments are your primary concern but you still want the benefits of ownership, Empeople’s Payment Saver auto loan offers an alternative worth considering.
There’s no one-size-fits-all answer to the automobile lease vs. buy question, but understanding the tradeoffs can help you choose with confidence.
