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Buy or Lease Your Car: The Pros and Cons

Is it better to lease or buy a car? The answer depends on several factors. Use this guide to weigh all the pros and cons of buying vs. leasing.

February 22, 2022

Whether you prefer trucks, SUVs or electric vehicles, there’s nothing quite like driving a new car off the lot. 

But getting a new car is a huge financial decision and it can affect your budget for many years to come.

In this guide, we’ll look at two of the most common options when it comes to getting a new car: buying and leasing. 

Is it better to lease or buy a car? Find out below. 

What does leasing a car mean?

When you lease a car, you are essentially renting the vehicle for a set period.

You make an initial payment at the time you sign the lease — usually somewhere between $500 and $3,000 — and then payments for the agreed number of months. 

The monthly payment depends on the vehicle type, annual mileage and creditworthiness. Currently, the average payment for a car lease is around $460 per month.

At the end of the lease, you have to return the vehicle to the dealer. You don’t own the vehicle. Leasing is closer to renting than it is to buying.

Leasing is quite common; data shows that over 26% of new vehicles were leased as of late 2020. 

Car lease example

When you initially lease a vehicle, you will choose the lease term (length), as well as the annual maximum miles that you are allowed to drive without penalty.

The most common car lease terms are 24 months, 36 months and 48 months (2, 3 or 4 years, respectively). 

The lease mileage cap is generally between 10,000 and 18,000 miles per year. If you exceed this limit, you may have to pay extra. 

Here’s what a typical lease for an SUV might look like if you have good credit:

  • $2,000 due at signing

  • 36-month term (3 years)

  • $300/month for 10,000 miles/year, or $350/month for 15,000 miles/year

In this example, $2,000 is due at the time you lease the vehicle (plus taxes and fees). You would then pay $300/month for the next 36 months, or $350/month if you opt for the higher mileage limit. 

At the end of the lease, you would return the vehicle to the dealer. There may be a small cleaning fee or other expenses to pay at this time. If the vehicle is damaged, you would likely be responsible for the repair costs. 

Many leases also allow you to purchase the vehicle at the end of the lease term. Check your lease’s fine print or ask the dealership for details. 

Keep in mind that you will also have to pay for insurance, gas, and certain maintenance costs that aren’t covered by the lease. Your insurance rate may also go up if you lease a new vehicle because the car is more valuable. 

So while $300/month might seem affordable, remember that there are various other costs associated with driving a new vehicle. Be sure to calculate the total cost of the lease before signing an agreement. 

Given all this information, is it better to lease or buy a car? Before answering this, let’s compare buying vs. leasing a vehicle. 

The difference between leasing and financing a car

Both leasing and buying a car outright usually involve a down payment and a monthly payment. So what is the real difference between leasing and financing a vehicle? 

When you finance a car, you are taking out a loan to purchase the vehicle. You own the car and will make payments toward the loan over time. Eventually, when the loan is paid off, you own the car outright and can sell it, trade it in or keep driving it for as long as you’d like. 

When you lease a car, you are essentially renting the car for a time. You make monthly payments for a set period, but the dealer owns the vehicle. Once the lease expires, you must return the vehicle to the dealer; you never actually own the vehicle. 

You will likely need a good credit score to lease a vehicle. To buy, a wider variety of credit scores are acceptable — but buyers with lower credit scores will pay much higher interest rates.

Interestingly, both buying and leasing a car can have similar effects on your credit score and debt-to-income ratio. 

If excessive credit card debt is affecting your finances, check out Tally†. Tally is a personal finance app offering a lower-interest line of credit that may help qualifying applicants pay off credit card debt faster. Learn how Tally works here

Is it better to buy or lease a car? 

Given what we’ve learned so far, is it better to buy or lease a vehicle? 

Over the long term, buying usually makes more financial sense. When you buy a vehicle, you own it, and after you finish paying off the loan, you’ll have no monthly payment (besides insurance, repairs, etc.)

With a lease, you must return the vehicle at the end of the lease term — leaving you without a car. Most people then lease another new vehicle, which creates a cycle where you always have a high monthly car payment. 

However, the decision of lease vs. buy isn’t always so cut and dried. Let’s look at the pros and cons of each approach. 

Related reading: Should I buy a new car

Leasing a car: Pros and cons


  • Costs are predictable 

  • Most maintenance and repair costs will be covered under warranty

  • You get to drive the latest model vehicle

  • Monthly payments may be lower than the monthly payments to buy

  • You don’t have to worry about price fluctuations, trade-in values or the hassle of selling a vehicle


  • Leasing usually costs more than buying over the long term

  • If you lease continually, you will always have a monthly payment and never own a vehicle outright

  • Leases limit you to a certain number of miles per year; you may face additional fees if exceeded

  • There may be wear-and-tear charges if the vehicle is damaged

  • There are early termination fees to get out of a lease prematurely

  • You typically can’t customize the vehicle as much as you could with a car you own

  • You’ll likely need a good credit score to lease a vehicle

Buying a car: Pros and cons


  • You own the car once you pay it off

  • The long-term costs are usually lower than leasing vehicles repeatedly

  • You can customize the vehicle as you see fit

  • You can sell the car or trade it in if you want

  • You can choose from a wider variety of vehicles (new, used, all types of makes and models)

  • You can buy used to save money


  • Monthly payments may be higher than a lease payment

  • You will likely need to borrow money and pay interest 

  • If you have poor credit, you may have to pay a higher interest rate on the loan

  • You are responsible for all maintenance costs and repairs

  • As the car ages, you will likely face more issues and potentially costly repairs

Buying vs. leasing in 2022

You have probably noticed that everything seems more expensive lately. This is particularly true for vehicles; the average new vehicle is now over $45,000

Does the current state of the automotive market affect the math on buying vs. leasing? 

It may, particularly if you can find a good promotion on a lease. 

The conventional logic is that it’s more cost-effective to buy, and ideally, to buy used. But used car prices have spiked even more than new car prices. 

Higher prices on new and used vehicles mean higher down payments, higher monthly payments, and higher financing costs for buyers — all of which may make leasing more attractive.

However, it’s essential to do the math on buying vs. leasing for your specific circumstances. Only then can you make an informed decision on which path is right for you when it comes to the question, “is it better to lease or buy a car?” 

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