| Monthly Car Payments |
Monthly car lease payments are usually lower than monthly car loan payments because you are paying only for the vehicle's depreciation during the car lease term, plus rent charges (like interest), taxes, and fees. |
Monthly car loan payments are usually higher than monthly car lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees. |
| Mileage |
Most car leases limit the number of miles you may drive (often 10,000-15,000 per year). You can negotiate a higher mileage limit and pay a higher monthly payment. You will likely have to pay charges for exceeding those limits if you return the vehicle, usually 10 to 15 cents per mile. |
You may drive as many miles as you want, but higher mileage will lower the vehicle's trade-in or resale value. |
| Car Ownership |
When you lease a car, you do not own the vehicle. A leasing company usually owns the vehicle, and lets you "rent" it over a specified period. You get to use it but must return it at the end of the car lease unless you choose to buy it. |
When buying, a bank owns the vehicle during the term, but you own the vehicle and get to keep it at the end of the term. |
| Up-front Car Costs |
Up-front costs may include the first month's car payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and fees, and other charges. |
Up-front costs include the cash price or a down payment, taxes, registration and fees, and other charges. |
| End of Term |
At the end of the car lease (typically 2-4 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle. |
At the end of the car loan term (typically 4-6 years), you have no further car loan payments. |
| Excessive Wear |
Most car leases limit wear to the vehicle during the lease term. You will likely have to pay extra charges for exceeding those limits if you return the vehicle. |
There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle's trade-in or resale value. |
| Vehicle Return |
You may return the vehicle at lease end, pay any end-of-lease costs, and "walk away". |
You will have to sell or trade-in the vehicle when you decide you want a different vehicle. |
| Early Termination |
You are responsible for any early termination charges if you end the car lease early. |
You will be subject to a buy-out charge if you end the car loan early. |
| Future Value |
The lessor has the risk of the future market value of the vehicle. |
A buyer can sell their vehicle for market value at any time. |
