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The Difference Between Buying and Leasing a Car

Jan 20, 2021 - Posted by: Rocky Mountain Credit Union

Deciding whether to lease or buy is a matter of balancing lifestyle and financial choices. While it’s most common to pay cash or take out a loan when you’re shopping for a new car, there are other choices out there, too. Leasing is also common and no longer reserved for corporate and luxury car buyers.

Leasing can give you the opportunity to drive a more expensive car than you might otherwise be able to afford, often with lower monthly payments. On the other hand, buying gives you more freedom in how you use the vehicle, and you can sell at any time. There isn’t a clear-cut answer to the question of whether to lease or buy, so consider these factors to help you decide which option is right for you and your finances.


Monthly Payments

When you choose to buy a car, you likely intend to have it for a while. Your monthly payments will depend on the entire cost of the vehicle, the value of the loan, and how many months or years you’ll take to pay it off. You’ll also have to pay a down payment up front, and other basic monthly costs include gas, insurance, and repairs. 

When you lease, you only pay for the residual value that occurs during the lease term, with lower repair costs that are covered by the leasing company warranty. That means you’ll have lower monthly payments and no down payment, which can be a big benefit for some people. However, you may need to pay a deposit when your lease begins.



Buying is likely the best option if you want to own the car, as you’ll be given a title that belongs to you. When you buy, you get to have all the ownership rights when the loan is paid off. It gives you more flexibility because you can sell or use it as a trade-in on the next car that you buy. 

Since you don’t own the vehicle when you lease, it must be returned to the owner once your lease term ends. However, you do have the option of buying the vehicle once the lease term is up. 

When you own the car, its cash value is yours even if the vehicle depreciates. With a leased car, the future value won’t have any financial effects on you. But one downside is that you’ll have no equity in the vehicle, either.



Whether you lease or buy, you have the option to modify or customize the car as you like. However, no restrictions apply when you purchase the car. When it comes to leasing, you don’t have as many options. You are limited in vehicle customization because the leaser will want it in a sellable condition upon return. Any installed modifications will have to be removed before you return the car. You’ll also have to fix any residual damage.


Mileage Limits

Another advantage of buying a car is that there are no restrictions on mileage. You have the freedom to drive as many miles as you wish, taking all the long road trips your heart desires – though keep in mind that a higher mileage will decrease the resale value. Buying a car can be more beneficial if you live in a rural area or have a significant commute. 

Leasing agreements, on the other hand, have mileage restrictions, and you could end up paying stiff penalties if you break them. The common mileage restriction is 12,000 miles annually, but the standard range is between 9,000 up to 15,000 miles per year. However, depending on your needs, you may be able to request an increase in mileage.

There is no one-size-fits-all answer to the debate between buying or leasing. You need to carefully consider the pros, cons, and costs to determine which option is the best for you. Take a look at your budget, credit history, and lifestyle needs before you take the leap.   

For top advice on the financial factors to consider when you’re looking for a new car — whether you’re hoping to buy or lease — get in touch with RMCU’s team of pros today.


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