Deciding whether to buy or lease a new vehicle can be confusing. One option is not necessarily better than the other—knowing the costs and benefits of each will help you determine which option is right for you.

Buying

When you buy a vehicle you pay for its entire cost, regardless of how many miles you drive it. Buying a vehicle outright is usually the more cost-effective option over the long term. But most people finance a portion of their vehicle purchase—which can add significantly to the vehicle’s total cost.

Tip: Calculate the interest on your loan before you buy so you know how much you’re really spending.

Leasing

When you lease a vehicle, you pay for only a portion of its entire cost—that portion that you "use up" during the time you're driving it. In other words, you pay primarily for the car’s depreciation. This substantially lowers your monthly payment when compared to purchasing the same vehicle. At the end of the lease, you either return the car to the leasing company or purchase it for a predetermined amount.

Leasing may be preferable to buying if having a new car every few years is important to you; or if you don’t have the down payment you need to make financing your purchase affordable.

The long-term costs of leasing are always higher than the long-term costs of buying. Still, leasing does have its benefits:

• If you lease for the length of the manufacturer's warranty, you'll never have to pay for major repairs.
• You can lease without a down payment, although making one will lower your payments.

Drawbacks to leasing as opposed to buying include:

• Terminating a lease before it's up can be extremely costly.
• Since you don't own a leased car, you can't change it, paint it, or make major modifications to it.
• Putting more miles on the car than the lease allows can add additional costs, since you'll pay extra per mile for every mile driven over the allowance.

Tip: Don’t compare leases based solely on the dealer’s advertised monthly payment. Lease payments can often be manipulated to make even the worst deal look good. Read the fine print and make sure you understand all the terms. You want to get the lowest capitalized cost or lease price of the vehicle, because your payments are based on this cost. This is where the Auto Buying Program can help—call us at (800) 318-4981 to learn how our endorsed dealers can offer you the lowest monthly lease prices.