Buying vs. Leasing a Car — Which One’s Right for You?

July 08, 2021  |  Porte Team

One of the most common questions people have when they are in the market for a new car is, “Should I buy or lease a car?”

To help you figure out your answer to this question, we’re diving deep into the world of car buying and leasing. Not only will we cover the main difference between the two, but we will also compare buying and leasing in four categories:

  • The down payment
  • Monthly payments
  • Terms and conditions
  • Mileage


What is the primary difference between buying and leasing?

The main difference between buying and leasing a car comes down to one word: ownership. When you buy a car, you own it and can keep it as long as you choose. When you lease a car, you pay for the right to drive a car for a fixed period of time. Think of leasing as renting a car on a long-term basis from a dealership.

Lease terms usually last between 2 and 4 years. At the end of the term, you have the option to purchase the car at a predetermined amount (usually defined in the lease contract), or to return it. Leasing also comes with an extra set of terms and conditions that you need to abide by until the lease ends. These terms and conditions vary depending on the type of car you lease and the dealership you lease it from.

Now that we covered the main difference between buying and leasing a car, let’s take a closer look at each. You will find that buying or leasing a car comes down to your personal preferences, lifestyle, and budget. The following four categories were selected to help you figure out which option makes the most sense for you.


Do you have money for a down payment? 

  • Buying: If you’re taking out an auto loan to purchase a car, keep in mind that you typically need to put down 10% of the price tag to get the best possible loan rates. The more money you put towards the down payment the less you’ll have to pay in interest, and you could potentially have lower monthly payments. Don’t have 10% of the car’s price tag to put down? You can consider:
    • Buying a less expensive car
    • Trading in your current car in exchange for credit toward the price of the car
    • Saving until you have 10% of the car’s price tag
    • Getting prequalified for an auto loan to ensure you will be able to make the minimum monthly payments
  • Leasing: If you don’t have a down payment, leasing may be a better option for you. Depending on the dealership and type of car you’re leasing, you might not have to put any money down. You will have to pay a refundable deposit, taxes, and other fees to drive the car off of the lot, but the amount of money you pay upfront could be less than if you are buying a car.


How are monthly payments different for buying or leasing?

There are two things to consider when thinking about the monthly payments you can afford: the length of time you will be making payments and how much each payment will be.

  • Buying: If you take out an auto loan to purchase your car, you make monthly payments until the loan and loan interest is fully repaid. Meaning, after the loan is paid off you won’t have a monthly car payment. Your total monthly payment is impacted by several factors, including how big of a down payment you made, your credit score, and the loan’s interest rate.
  • Leasing: Part of a lease agreement is that you make monthly payments until you return the car. There isn’t a “pay off” date. The monthly payments for leasing a car depend on several factors, including:
    • Car sale price
    • Length of the lease
    • Expected mileage
    • Residual value (the value of the vehicle at the end of the lease)
    • Rent charge
    • Taxes and fees


What are the terms and conditions?

  • Buying: When you buy a car, you have the flexibility to trade it in, sell it, or use it until the wheels fall off. You can also modify your car, drive it as much as you’d like, and you don’t have to sweat it when your car gets a dent, ding, or scratch. If you have an auto loan, all you need to do is make on-time and consistent minimum monthly payments to be on great terms with the bank.
  • Leasing: Leasing a car comes with a set of rules to abide by. These rules vary depending on the dealership you are leasing from, as well as the type of car you are leasing. For example:
    • If you return the car early, there are often early termination penalties
    • If you want to make any modifications to the car, you need to ensure that the modifications would not break the contract
    • The car needs to be returned in great condition, or you will end up having to pay for repairs
    • There is a predetermined limit to the number of miles you can put on a vehicle during the lease term (more on this below)


What mileage do you expect to put on your car?

  • Buying: Do you drive a lot for work? Do you love taking road trips? If you answered yes to either of those questions, buying a car may be the best choice for you. When you buy your car, you can put as many miles as you’d like to on it.
  • Leasing: The typical mileage limit for leases is between 10,000 to 15,000 miles per year. When the lease ends, the car’s mileage needs to be at or below the previously agreed upon limit or you’ll be charged an overage fee for every mile over the limit.



Ultimately the choice between buying and leasing a car depends on your preferences, your lifestyle, and your budget. As with any major financial decision, it’s best to do your homework to figure out what makes the most sense for you. Take your time in making the decision, and shop around. Prices, whether you are buying or leasing a car, will vary from dealership to dealership. Dealerships will also run the numbers for you, making it easy to see the differences between buying and leasing a specific car.

No results for “

Please try another search term.

Related Articles

Download the app1 to openDowload the app image - config an account2

block-half-cards-single-card content
  1. Standard data rates, fees, and charges may apply. Consent to receive electronic account disclosures required to use the app.
  2. **IMPORTANT INFORMATION FOR OPENING A NEW DEPOSIT ACCOUNT:** To help the federal government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires us to obtain, verify, and record information that identifies each person who opens an Account. **WHAT THIS MEANS FOR YOU:** When you open an Account, we will ask for your **name, address, date of birth, and your government ID number.** We may also ask to see a copy of your driver’s license or other documents at any time. All Accounts are opened subject to our ability to verify your identity by requiring acceptable types of identification. We may validate the information you provide us to ensure we have a reasonable belief of your identity. If we are not able to verify your identity to our satisfaction, we will not open your Account or we may close the Account if it was previously funded. Your Account is subject to fraud prevention restrictions at any time, with or without notice.
  • Apple® and Apple Pay® are trademarks of Apple Inc. A list of compatible Apple Pay devices can be found here: https://support.apple.com/en-us/HT208531

    Google Pay™ and Google Play™ are trademarks of Google LLC. 

    PayPal and the PayPal logo are registered trademarks of PayPal, Inc. Designated trademarks and brands are the property of their respective owners. 

    Porte is a mobile finance app, not a bank. Banking services provided by Pathward, National Association, Member FDIC. 

    Porte is a deposit account established by Pathward®, National Association, Member FDIC, and the Porte Debit Card is issued by Pathward, N.A., pursuant to a license from Visa U.S.A. Inc. Certain products and services may be licensed under U.S. Patent Nos. 6,000,608 and 6,189,787. Card may be used everywhere Visa debit cards are accepted.

    Porte is a trademark of Populus Financial Group.

    Populus Financial Group, Inc. engages in money transmission services as an authorized delegate of NetSpend Corporation (NMLS \#932678). State licenses, disclosures, and complaint information may be found here www.netspend.com/help/licenses

    © 2023 Netspend Corporation. All rights reserved worldwide. Netspend is the federally registered U.S. service mark of Netspend Corporation. All other trademarks and service marks belong to their owners. 

    Copyright © Populus Financial Group, Inc. 2023. All rights reserved.