Skip to main content

Auto Loan Basics

Should you lease or buy your next car?

Continue to

is responsible for their content and offerings on their site, and their level of security may be different from ours. Please refer to their privacy policy and terms of use for details.

If you’re in the market for a car and trying to decide whether to lease or buy, here are 8 questions you should ask yourself before you make your final decision.

Between tempting sales offers and attractive leasing options, it can be difficult to decide whether to buy or lease a car. Leasing has surged in popularity over the past decade, with manufacturers sweetening lease terms as an incentive to get people back into the auto market.

But is leasing right for you, or does it make more sense to buy? Regardless of which way you lean, it's important to weigh the pros and cons—including the potentially higher long-term costs of a lease compared with buying or the fact that buying means you own a depreciating asset.

Here are the most important questions to ask:

1. Are you a road warrior?

In the lease-or-buy debate, the biggest deciding factor is how much you drive. Besides a monthly payment, a lease comes with a mileage limit of around 10,000 to 15,000 miles a year—or typically around 36,000 miles for the life of a standard, 3-year lease.

If you go over that amount, you’ll pay for each additional mile you drive when you turn in your car at the end of the lease. If you live in an area where you can walk or take public transportation, chances are good that you’ll come in under the annual mileage cap. But if you live in an area where you log 30 miles just to get to work, over-the-limit mileage charges can add up quickly.

Kids can also change the leasing equation. If you spend a significant amount of time every week ferrying kids back and forth to soccer and ballet practice, you might exceed the mileage cap.

The typical American who is 35-54 years old drives an average of 15,291 miles each year, according to the Federal Highway AdministrationFootnote2. To figure out how many miles you rack up, track how much you drive during a typical week so that you can project your annual mileage. Be sure to account for any additional mileage beyond the weekly commute, such as family trips and vacations.

If you drive a lot but still want to lease, you could opt for a high-mileage lease agreement. While your monthly lease payment will be higher, the extra miles cost less up front than they would if you go over a mileage cap. Still, if you plan to log lots of miles or use your car for a car service or a delivery service, buying is probably a better option.

2. How hard are you on your vehicle?

Keep in mind that children and pets tend to put more wear on a car. That's important, since returning a car in poor condition can result in wear-and-tear penalties. In that case, you might consider buying or, if you lease, investing in wear-and-tear insurance.

3. Do you love the latest gadgets?

Can't wait to try the latest Bluetooth technology? Want the newest rearview camera? A lease is probably your best bet. You can trade in your car for a new model every few years and enjoy the newest features. What’s more, you won't have to worry about a leased car depreciating in value since you never actually own it.

4. Do you anticipate any major life changes in the near future?

It's also important to consider your job security and financial stability over the next few years. If you lose your job and you own your car, you can sell it if the payments are too much for your wallet. With a leased car, some manufacturers offer the option to sell or transfer your lease, but more often you’ll be forced to pay a fee to terminate your agreement early.

5. Does it sound too sweet?

Some dealers entice drivers with leases requiring no money down, but those offers come at a price: You'll pay a higher monthly payment, which often ends up costing you more over the life of the lease. Plus, if your credit is less than stellar, those zero-down terms can be hard to secure.

On the opposite end of the spectrum, some dealers charge low monthly rates but require a hefty down payment. The bottom line: Read the fine print.

6. Are you willing to take a risk (for a better price)?

For extra savings, some people lease used cars. Leasing a pre-owned car rather than a new one can lower your monthly payment, but it also means assuming some risk. If you lease a car that is already 3 years old, it's typically out of warranty, so you may have higher repair and maintenance costs. It's also harder for dealers to determine the depreciation of an older car—a figure they use to set your monthly payment—so you could end up paying more than the car is worth.

7. What are the total costs?

With new-car leases, your car will be under warranty, so you’ll save on potential out-of-pocket repairs. However, insurance costs on leased cars are typically higher. Take the time to add up all the costs: insurance, potential repairs and monthly payment.

8. Have you looked beyond the monthly payments?

It can be tempting to look only at monthly payments to determine the merits of leasing versus buying, but those figures can be deceiving. Whether you intend to start a new lease at the end of your term or purchase the car when your lease is up, you should consider additional costs like the down payment and the buy-back price of the vehicle. Although you’ll likely pay less on a monthly basis to lease, it can often be more economical in the long run to buy.

And remember: You can negotiate the selling price for a lease just as you would for a purchase. If a monthly payment seems high, speak with the dealer about reducing the price and take advantage of any available manufacturer rebates. You can also lower the amount you owe each month by making a larger down payment.

Whether you decide to buy or lease, be sure to do the math before you make your choice. You’ll want to make the decision that’s right for you, of course, but in doing so you’ll want to understand all the impacts your decision will have on your finances.

Get more with Bank of America auto loans

Get more with Bank
of America auto loans