Should I lease or buy my next car?

Concerns & risks

You're replacing an old car, a lease payment looks tempting, and you're hearing strong opinions on both sides.

Causes & evidence

When you lease, you pay for the car's expected depreciation during the lease term plus fees and a finance charge, then return it. The FTC notes leases usually include a mileage limit, with charges for miles over it, and fees for excess wear and tear when you return the car, plus possible early termination charges. When you buy, whether with cash or a loan, you pay more each month on a loan, but you own the car and can keep it after it's paid off. Over many years, keeping a bought car usually costs less than leasing one car after another, while leasing gives you a newer car more often.

Lease contracts list the capitalised cost, residual value and money factor, which together determine the payment. Ask for these figures in writing.

Comparing only monthly payments ignores mileage limits, wear charges and what you have at the end: a car you own or nothing.

What to do

1. Estimate your yearly miles honestly from your past odometer readings.
2. Decide how long you usually keep a car.
3. Ask for the lease's capitalised cost, money factor, residual value, mileage limit and fees in writing.
4. Get a loan preapproval and compare the total cost of buying and keeping the car.
5. Negotiate the car's price first, whether you lease or buy.

Common mistakes:

• Choosing a lease mileage limit lower than you drive
• Ignoring wear-and-tear and disposition fees
• Only negotiating the monthly payment

ReportSpeedMan tip: If you lease, ask whether gap coverage is included, since it covers the difference between insurance payout and what you owe if the car is totalled.

What I would actually do

with 12,000 miles a year and a habit of keeping cars a long time, I'd buy, ideally a lightly used model, and keep it well past the loan.

The trade-off people miss: owning means paying for repairs once the warranty ends, while a lease mostly avoids them. Budget for maintenance if you buy.

Checking that it worked

You've compared total costs in writing and chosen what fits your miles and habits.

Quick FAQ

Can I buy the car at lease end?
Usually, at the price in the contract.

Can I negotiate a lease?
Yes, especially the car's price.

What about extra miles?
You pay a per-mile charge set in the contract.

Wrap-up: Lease if you drive within the mileage limit and like changing cars every few years; buy if you keep cars for a long time. Compare total costs, not just the payment.

Wiki: Fuel Economy Basics and Credit Scores and Credit Reports.

Should I lease or buy my next car: primary sources

• FTC: Financing or leasing a car
• CFPB: Auto loans