Financing VS. Leasing

Financing or “buying” is when you pay a large down payment and pay for the rest of the cost through a lender, like a bank or the dealership. You’ll have bigger monthly payments than if you lease, but you also get to keep the car when you finish making payments. Usually, a lien is placed on your car until you finish payments, which means the lender will keep the title until you pay it off.

Financing is the most common way to buy, but there are a few factors to keep in mind. First, you’ll typically need about 10-20% of the sticker price as a down payment. You’ll also need to be able prove you can make large monthly payments for a few years.

Ultimately, financing is a cost-efficient long-term way of getting a car; you pay more up front but it tends to be more value in the long run.

Leasing is much like renting a car for a period of time. Lease contracts vary in many ways, so you should always reference your lease for details. For the most part, leases usually last for two to three years, and the monthly payments are almost always more affordable than when you finance.

When you lease a car, you don’t get to keep the car. Many leases stipulate that you pay for maintenance and any necessary repairs, too.

Leasing is great for those on a fixed income, particularly people who may not be able to afford large down payments right now—recent grads, retirees, and part-time workers, for example. Leasing is also appealing to those who want to upgrade to a better car than they can normally afford, like a sports car or luxury model. You may also prefer to lease simply because you have the option to pick a new car every few years.