All Financial Education

Should you buy or lease a car?

June 21, 2018

Man signing paperwork at car dealership.

Summer is a great time to look into getting that vehicle you have been eyeing.  But there is more than one way to get into that ride.  Should you buy or lease?

What is the difference?

Ownership is the main difference between buying and leasing your car. When you purchase a vehicle, you have to pay for it in cash or finance the cost and when it is paid off, you own it. When you lease, you are essentially renting your car from the dealership, you will never own the vehicle (unless the lease agreement gives you an option to buy at the end of the contract). In a lease agreement, you will only have to pay for the difference in the price negotiated and the car’s expected value at the end of the lease. Basically, you will be paying for the depreciation that will occur over the term of the contract.

Advantages to leasing

Lower monthly payments

Monthly payments are typically much lower on a leased vehicle, but remember, you are paying to drive the car, not to own it.

Getting a new car every few years

When leasing, you’ll be able to lease a new vehicle after your original lease ends, this makes it easy to upgrade every few years.

Not having to worry about trading in or selling your old car

Since you don’t own your vehicle, you never have to worry about selling or trading your car once you are ready to upgrade.

Writing off lease payments

If you are using your vehicle for business, you may be able to take a tax deduction on your monthly payments.

Downsides to leasing

Mileage restrictions

Most every lease has mileage restrictions in the contract, typically allowing between 9,000 – 15,000 miles per year before you have to pay excess mileage charges. These charges can range 15-20 cents or more per mile.

Excess wear fees

Make sure you are clear when you sign the lease as to what is expected when you return the vehicle. Many lease contracts will require you to bring the car back in nearly the same shape as when you signed the agreement.

No equity

This one speaks for itself.  When leasing a car at the end of the agreement, you will not have anything to show aside from the time you got driving the vehicle.

Advantages to buying

No monthly payments once paid off

Since you will own the car once you finish paying, you can drive the car for many more years without having to worry about any monthly payments once it is paid off.

No need to worry about restrictions

You won’t have mileage or excess wear fees to worry about. However you treat the car will be your business.


If you want to add anything additional the car after buying it, whether it be better tires, a great sound system, etc., it is all up to you!

Downsides to buying

Higher monthly payments

Although you will eventually own the vehicle and gain equity, if you are dire need of smaller monthly payments, leasing might be a better option.


Once your warranty expires (if you have one), you will be responsible should anything come up with the health of your car.

Trading in/selling car

Once you decide to upgrade, if you own your vehicle, you’ll have to do the work in order to get a good deal selling or trading in your car.

If you are having a hard time deciding which option would be best for you, stop by any Idaho Central branch or give us a call and we would be happy to walk you through the process and help you decide your best route.  We can also connect you with one of our many preferred dealers and get you into a great rate for your next car.