What Are the Benefits of Leasing a Car? Learn the Pros and Cons
Decide whether buying or leasing a car is right for you.
Lower Monthly Payments
A monthly lease payment may be less than a loan payment on the same car. A lease payment accounts for the depreciation value of the car, rather than the total value of the car when it’s purchased.1
Fewer Costly Repairs
In most cases, a leased vehicle will still be covered under warranty—aside from accidental damage, it’s unlikely that you’ll have to foot the bill for most repairs. There’s a good chance that basic maintenance jobs (like oil changes) are covered in your lease agreement as well, so you likely won’t have to worry about unexpected repair costs.2
A Safer Vehicle
Leasing a car allows you to drive a nicer vehicle than you may be able to afford if you bought a car outright or got a car loan. As a result, you may get a car with better safety features.2
Self-employed? You may be eligible for tax benefits on a leased car. But, if you also use the vehicle for personal reasons, you may need to prorate the deduction based on a percentage of use.3
When your lease ends, you can just return the car to the dealership. You don’t have to worry about finding out the car’s trade-in value or finding a buyer.2
Higher Overall Costs
Over time, leasing a car can cost more than buying one, especially if you lease multiple cars in a row and have monthly payments for years. In contrast, if you take out a loan to buy a car, you’ll eventually pay it off.2
It’s important to return a leased car in pristine condition—or you may get stuck with a costly wear-and-tear fee. Kids, pets or just a few dings from parking lots can rack up wear-and-tear fees.1
Most lease contracts limit the number of miles you’re allowed to drive, typically 12,000 per year. Be aware of “low mileage” leases, which only allow 10,000 miles per year. If you go over, fees can range from 10 to 20 cents per mile.2,4
Early Termination Fees
Many car leases have early termination fees or other penalties if you need to cancel early. Sometimes, these charges can cost as much as the entire lease.2
You’ll still have to pay for some maintenance, like new tires. Depending on your vehicle, this may be expensive, especially if it’s a nicer vehicle that has high-end wheels.2
Here’s a breakdown of the average total out-of-pocket costs over six years (the average length of time an American keeps a car) for a compact SUV.6
* An average lease lasts three years. To accurately compare to the average six-year loan / ownership of a vehicle, this lease estimate includes a second three-year lease.6
No matter if you lease or buy a vehicle, you’re likely legally required to purchase auto insurance. If you lease a car, though, you may have to pay for more coverage. Leasing companies often want to ensure their cars are fully protected—and this can mean requiring the lessor to buy more insurance protection. It’s important to discuss your insurance requirements when you go to negotiate your lease. The more you know, the better off you are.
You can also call your auto insurance company at any time to find out your policy details. It’s possible they may be able to help you negotiate a lower price or share details about your current coverage. Remember, your insurer is there to advocate for you.
- Pros and Cons of Leasing vs. Buying a Car, The Balance, 2020.
- Leasing vs. Buying a New Car, Consumer Reports, 2021.
- The Tax Advantage of Leasing a Car if Self-Employed, Chron, 2021.
- Beware of the Low Mileage Car Lease, Motor Biscuit, 2020.
- 10 Steps to Leasing a New Car, Edmunds, 2017.
- Buying a New Car vs. Buying a Used Car, Edmunds, 2021.
- What happens at the end of a car lease? Policy Genius, 2020.
- How to Return a Car at the End of a Lease, Edmunds, 2020.
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