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Leasing vs. Buying a Car: What’s the Difference?

Key Takeaways

  • Leasing a car means you only have it for a set period of time; buying means you own it for as long as you’d like.
  • Leasing a car is cheaper in the short term, but more expensive in the long term.
  • Buying a car is more expensive in the short term, but cheaper in the long term.

You and your old car have been through a lot. It was there when you first got your license, shuttled your friends around town, and maybe even tagged along at college.

Yeah, you and your car have been through a lot. But now it’s time for a new ride. You’re an adult now; you want a car that shows you’ve arrived in the adult world.

Finding the right car is the easy part. Deciding whether to lease or buy that car takes a little more thought. So how do you know which option is best for you?


Leasing a car is essentially renting a car for multiple years. Typically, you put money down at signing and then make the same monthly payment for the entire term of your lease — typically 24 or 36 months. When the lease term ends, you have two options:

  1. Return the car, or
  2. Buy the car

What happens when you return the car? You can either lease a different one — at the same dealership or somewhere else — or decide to buy a different car. If you decide to buy the same car you leased, you’ll pay more for that car over time than if you had just bought it outright in the first place.

Leasing is an easy way to get into that new adult car without a long-term commitment or larger down payment. On the flip side, it’s more expensive to lease over the long term because you’ll have a car payment for as long as you lease.

Here are some additional pros and cons to leasing a car:


Buying a car is much different than leasing. The main difference is the car is all yours — you can do whatever you want with it. Want to drive it cross country on a road trip? Go for it. There are no mileage limits to hold you back. How about upgrading the sound system? Have at it. Once you’ve bought the car, you can use it however you please.

Still, buying a car is expensive. Paying the entire cost in cash is ideal, but not realistic for most people, especially if it’s brand new. Fortunately, you can finance the purchase with an auto loan.

In most cases, you’ll need to make a down payment at purchasing. The down payment will range from 10% to 20% of the car’s purchase price, though you can always put down more. The remainder is paid off through monthly payments to the auto lender. (In rare cases, you could qualify for an auto loan without a down payment.)

You might balk at the idea of making a large down payment, but consider this: The more you put down, the lower your interest rate, monthly payment, and/or length of repayment could be since there’s not as much left to repay.

Once you buy a car, you can own it for as long as you want. You could drive it until it can drive no more, or own it for a few years and sell or trade it in to help purchase a new car. Before selling or trading in a car, you need the car’s title. Plus, you’re still responsible for paying off any remaining auto loan balance.

Here are some additional pros and cons to buying a car:

Do you have the savings to put down 10% to 20% on a car? Is this a car you see yourself driving for the next five-plus years? If so, buying is your best option. Once you pay off your auto loan, you’re free of a car payment. Now those funds can be put to good use elsewhere. However, if you can’t afford the upfront costs or would prefer to have a new car every few years, leasing is a more viable option.

Helpful tip: Look into buying a certified pre-owned car. They’re more affordable than a brand new car, plus they’re in good condition and have low mileage since they were leased and returned to the dealer.

More information

A car is one of the biggest purchases of your life, typically second only to a home. Need help saving for that new ride? Open a separate savings account for your next car purchase by clicking here; or, if you prefer, call us at 1-877-360-2472 or stop by your nearest Citizens Bank branch.

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