Auto · 7 min read
Lease vs Buy a Car: A Complete Guide
Understand the total cost of leasing versus buying, hidden lease fees, and when each option actually makes financial sense.
How leasing works
When you lease, you pay for the depreciation of the car during the lease term plus interest and fees. At the end, you return the car. Leasing gives you a lower monthly payment and a new car every few years, but you never own anything.
How buying works
When you buy, you finance or pay cash for the full value of the car. Monthly payments are higher, but you build equity. Once the loan is paid off, you can keep driving the car payment-free for years. You also avoid repeated lease startup fees.
Hidden costs of leasing
Leases come with mileage limits, often 10,000-12,000 miles per year. Excess mileage can cost $0.15-$0.30 per mile. You may also face wear-and-tear charges and disposition fees. If you customize the car, you will pay to undo it.
Action step
Use the lease vs buy car comparison calculator to compare the total out-of-pocket cost for your specific car price, lease payment, loan rate, and how long you plan to keep the vehicle.