How Leasing is Different From Buying
- Ownership
- Leasing: You do not own the vehicle. You may use it but must return it at the end of the lease.
- Buying: You own the vehicle and may keep it at the end of the financing term.
- Up-front costs
- Leasing: May include the first payment, a security deposit, a capitalized cost reduction, taxes, and registration.
- Buying: Include the cash price or down payment, taxes, and registration.
- Monthly payments
- Leasing: Lease payments are usually lower because you are paying only for the vehicle's depreciation, plus rent, taxes, and fees.
- Buying: Loan payments are usually higher because you are paying for the entire price of the vehicle, plus interest, other finance charges, taxes, and fees.
- Early termination
- Leasing: You are responsible for any charges if you end the lease early.
- Buying: You are responsible for any pay-off amount if you end the loan early.
- Vehicle return
- Leasing: You may return the vehicle at lease end, pay any final costs, and walk away.
- Buying: You may have to sell or trade the vehicle when you decide you want a different one.
- Future value
- Leasing: The lessor has the risk of the future market value of the vehicle.
- Buying: You have the risk of the vehicle's market value.
- Mileage
- Leasing: Most leases limit the number of miles you may drive.
- Buying: You may drive as many miles as you want, but higher mileage will lower the vehicle's value.
- Excess wear
- Leasing: Most leases limit wear during the term.
- Buying: There are no limits or charges for excessive wear, but excessive wear will lower the vehicle's value.
- End of term
- Leasing: At the end of the lease, you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.
- Buying: At the end of the loan term, you have no further loan payments.
- the agreed-upon value of the vehicle--a lower value can reduce your monthly payment
- up-front payments, including the capitalized cost reductionthe length of the lease
- the monthly payment
- any end-of-lease fees
- the mileage allowed and per-mile charges for excess miles
- the option to purchase either at lease end or earlier
- whether your lease includes "gap" coverage
- use it for an agreed-upon number of months and miles
- turn it in at lease end, pay any end-of-lease fees and charges, and walk away
- buy the vehicle if you have a purchase option
- take advantage of any warranties, recalls, or other services that apply.
- excess mileage charges
- excess wear charges
- substantial payments if you end the lease early
Consider beginning, middle, and end-of-lease costs
Beginning: you may have to pay your first payment; a security deposit or your last payment; other fees for licenses, registration, and title; a capitalized cost reduction; an acquisition fee; freight/destination charges; and state/local taxes.
During the lease, you will have your monthly payment; any additional taxes such as sales, use, and property taxes; insurance; ongoing maintenance; and any fees for late payment. You'll also have safety and emissions inspections. If you end your lease early, you may have to pay early termination charges.
At the end of the lease, if you don't buy the vehicle, you may have to pay a disposition fee and charges for excess miles and excess wear.
Compare and negotiate terms like:
Know your rights and responsibilities
When you lease, you have the right to:
You may be responsible for:
