Key Takeaways:
- Whether you should lease or buy a car depends on your financial situation and lifestyle.
- Leasing can be less expensive monthly and you may not be liable for all repairs, but it may come with mileage restrictions.
- Buying a car comes with more responsibilities, but can offer more flexibilty and may be less expensive if you plan to own the car for a long time.
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As you shop for your next car, you may be considering whether you want to lease or buy. Your choice affects your monthly payment, how much you can drive and the responsibilities you have as a driver. According to a Frebruary 2026 TransUnion survey, among those planning a vehicle transaction, 87% plan to buy a car in the next year, while 13% intend to lease.
There’s no one-size-fits-all choice, but understanding your options can help you make the best decision for your situation.
Leasing a car
When you lease a car, you’re paying to use a car for a set period instead of buying it. You don’t own the car — you're agreeing to make monthly payments to drive it for the duration of your lease. When your lease is finished, you have multiple options, which include buying the car you were leasing, buying a new car, or entering into a new lease agreement for another car.
Costs of leasing can include the following:
- Down payment (including applicable fees)
- Monthly payment
- Charges for extra miles
- Excessive wear-and-tear charges
- Maintenance and repairs not covered under lease agreement
Benefits of leasing a car vs. buying
There are several benefits to leasing a car. Leasing typically offers lower monthly payments when compared to taking out a loan for the same car. Many leases also include warranty coverage, which means you may not have to pay for certain maintenance items or repairs. Your lease agreement will specify which repairs you are required to pay.
At the end of your lease period, you can turn in your current car without having to worry about reselling the car or trading it in. You can then lease or buy a new car. Or, you may have the option to buy the car you were leasing.
Typically, leases are for the latest model cars, so if you’re keen on always driving a newer car, leasing can be a great option. You can lease older pre-owned cars. Typically, these need to be certified pre-owned (CPO) cars that meet manufacturer standards. Leasing older, CPO cars may be cheaper than leasing a brand new car, though used-car leasing is a small portion of the market.
Disadvantages of leasing a car
One of the biggest disadvantages is the fact that you don’t own the car. Essentially, in addition to any down payment requirements, you’re paying a monthly fee to drive the car. Those monthly payments don’t go toward paying down any principal balance, like they would if you financed the car. There may also be mileage limits with your lease agreement, and you must pay extra money if you exceed those limits. Leasing may cost more in the long term than buying a car.
There may also be limits on any customizations or modifications you can make to the car, so you would not be able to personalize it.
Buying a car
When you buy a car, you can pay for it in full or use a loan to cover what remains after you’ve made a down payment. Once you’ve paid off your loan, you own your car outright. Whether you want to sell your car after you’ve paid it off or drive it for several more years, the choice is yours.
Costs of owning a car can include the following:
- Down payment (including applicable fees)
- Monthly payments if you have a loan (includes principal and interest)
- Repairs
- Regular maintenance
Benefits of owning a car vs. leasing
The biggest benefit of buying a car is getting to own your vehicle. At the end of your loan term, you’ll have full ownership of your vehicle. You generally won’t have mileage limits or restrictions on customizations. New cars will usually come with manufacturer warranties to cover repairs of covered defects of major systems, like your engine, transmissions or electronics. Warranties are usually for a set time frame or mileage, like 5 years or 60,000 miles. What is covered and for how long can depend on the manufacturer, car and covered part or system.
Disadvantages of buying a car vs. leasing
Buying a car means you have more responsibility, so you’re in charge of all maintenance and repairs after your warranty expires. There are also higher upfront costs when buying a car — particularly if you need to make a large down payment to secure a loan.
While you are the owner of the car, cars typically depreciate in value, meaning how much they are worth decreases over time. However, even with repair costs and depreciation, if you are OK with holding on to a car for a long time, owning a car can be less expensive than leasing.
Benefits of leasing a car
- Monthly payments may be lower
- Leases are usually for latest‑model cars or certified pre‑owned cars
- The car usually has warranty coverage through the lease term
Benefits of buying a car
- Could be less expensive long‑term
- No yearly mileage limits, and you own the car so you can sell or trade it in when it’s time to buy a new car
- New cars usually have warranty coverage for major system repairs for a set time frame or mileage
Should I lease or buy a car?
When deciding between leasing a car vs. buying, it’s important to consider multiple factors and carefully weigh your decision:
Assess your financial situation
Think about your current financial situation when deciding between leasing and buying. Does it make more sense to lease or buy a car with your budget? Compare the cost of leasing the car with the cost of owning a similar car. When making your comparison, you may also want to consider used cars, which are often less expensive. TransUnion has an auto loan calculator you can use to help.
Reading your credit report and getting a credit score can help you determine how healthy your credit is and what interest rate range on a loan you can expect. Generally, the better your credit health, the lower the interest rate will be for your car loan. Healthy credit can have a big impact on your monthly payment and total loan costs.
Assuming a $25,000 loan for 60 months
| Monthly Payment | Interest Rate | Total Interest |
|---|---|---|
| $472 | 5% | $3,307 |
| $495 | 7% | $4,702 |
| $544 | 11% | $7,614 |
| $595 | 15% | $10,685 |
| $662 | 20% | $14,741 |
For illustrative purposes only.
Review your credit report in advance of applying for a loan to be sure everything is accurate. You can dispute anything that is incorrect or the result of fraud. Dispute investigations can take up to 30 days, which is why you’ll want to check your credit report well ahead of car shopping. You can get your credit report for free each week at AnnualCreditReport.com.
Determine your ownership goals
Is it your goal to own a vehicle, or are you just looking for something you can drive to and from work and for occasional errands? Buying a car isn’t for everyone, so it’s perfectly fine if you want to avoid the responsibilities that come with car ownership. Leasing can help you reduce your ownership-related responsibilities. However, you still need to be mindful of your mileage limits.
Know your mileage needs
Before you decide to lease a vehicle, figure out how much you’re driving annually. Lease agreements often have mileage limits, and dealerships may impose fees if you exceed those limits. If you’re driving more than the annual mileage limit for the lease agreement you’re being offered, you may want to take out a loan instead.
Understand how your vehicle depreciates
When you buy a car, you get any potential resale value your car may have, but there’s a catch — vehicles depreciate over time. By the time you’ve paid off your car loan, the value of your car may be significantly less than what you paid for it. However, you have the flexibility to drive it for as long as you want and don’t need to worry about those yearly mileage limits.
Compare insurance costs
Different types of financing can result in different insurance costs, so it’s worth checking to see how leasing and buying affect your insurance rates. If the cost of insurance is considerably higher for you with one option, consider that when making your comparison.
Consider the cost of maintenance
When you buy your car, your dealership or manufacturer will typically provide a warranty for a certain number of years or miles — whichever comes first. When that warranty is over, you’re responsible for paying for repairs and maintenance out of your pocket.
Leases typically include warranty coverage, which means you don’t have to spend as much on maintenance and repairs. New and used cars may also come with warranty coverage when you buy them. It’s important to know what is and isn’t covered for the car you want to purchase. Also understand that not all cars have the same maintenance costs. Certain cars may cost more to maintain per year.
Examine end-of-term options
If you’re thinking about leasing, make sure you have a plan for the end of your lease term. You may have an opportunity to buy the vehicle you leased at the end of your lease agreement, or you can choose another vehicle to lease. Leasing another car may require an additional down payment. Know your options and make sure you have a plan before you commit to leasing a car.
Prepare your finances before car shopping
There’s a lot of information to process, and you must consider several factors before you decide. Consider both your financial and personal situation so you can make the best decision for your lifestyle. Knowing what’s in your credit report can give you confidence as you shop for your next vehicle.
You can see credit report options from TransUnion, including daily refreshes of your TransUnion credit report and alert notifications of credit report changes, on TransUnion’s free credit report page.
