Should you lease or buy a car?

Getting started |

Figuring out what financial decisions you can afford to make

The closer you get to graduating from college, the closer you get to become a real adult – with very real adult responsibilities, like paying back those student loans and deciding what types of financial moves you can afford to make. You might also feel like its time for a new ride, especially since you’re heading out into the professional world.

The first step is deciding what car you want or need. The second step is deciding whether you want to lease it or buy it. The right decision depends on your situation.

Leasing: What does it mean?

When you lease a car, you’re basically paying to use the vehicle, instead of outright buying it. The use of the vehicle includes its depreciation cost (meaning, the loss in value), as well as any excessive mileage, and wear and tear you put on the car during your lease.


  • Monthly lease payments are usually lower than car loan payments.
  • There’s often no or low down payment required.
  • Leasing gives you flexibility if you’re not sure you want to make long-term commitment. Typically, lease commitments are three years or shorter.
  • You have the option of driving a new car every two or three years.
  • Most major repairs will be covered by the manufacturer’s warranty.


  • Leasing contracts come with mileage limits (usually 12,000 to 15,000 miles a year), which means you’ll pay extra if you drive more than that. On the flip side, you won’t be credited for the unused miles if you drive less.
  • If you damage your vehicle, you will have extra wear-and-tear charges when you turn the car back over to the dealership at the end of your lease.
  • If you need to get out of the lease early, you likely will end up paying a significant lease termination fee which could be thousands of dollars.
  • No permanent alterations are allowed when you lease – so forget about that custom paint job.
  • At the end of the lease, you do not own the car and will have to return the car to the dealer without money paid back to you.
  • If you would like to purchase the car at the end of the lease, you likely will pay above the market value of the car.

Buying: What does it mean?

Buying a car means that you pay for the entire value of the vehicle regardless of how many miles you drive or how long you plan to keep it – the car is yours, for better or for worse. You can buy a car in cash or finance the car.


  • Once you pay for the car, it belongs to you.
  • You may save money in the long run, especially if you keep your car after you’ve paid for it (or pay off your loan). Think about it – all those months or years without a car payment!
  • You can customize your ride anyway that you want – go ahead and get that custom paint job!
  • You’ll have no excess mileage penalty – the car is yours, and you can drive it as much or as little as you want.
  • Once you own it, you can decide to sell it when you want.


  •  Monthly car loan payments are often higher than the monthly payments for a lease.
  • Once your warranty expires, you’ll be responsible for maintenance costs.
  • Your car begins depreciating the minute you drive it off the lot, which means you won’t be able to sell it for the same price that you bought it.
  • Selling or trading in your vehicle will be your responsibility when the time comes.

Both leasing and buying come with their own set of advantages and disadvantages. It’s up to you to figure out your best option.

Elise Romero


Elise Romero
Marketing assistant

Financial planning

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Auto loans from Everence Federal Credit Union are simple, plus we reward you for buying an electric or hybrid vehicle.1

If you're thinking about purchasing or leasing a vehicle, take some time to learn how financial planning can benefit you, whatever your age or circumstance.

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This material has been prepared for informational purposes only. Please consult with your financial professionals.

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