Leasing a New Car vs. Buying a Used Car

What's better for you: Buying used or leasing new?

With thousands of vehicles in our inventory, we’re here to help make car research easier for you. We’ve partnered with the car-review experts from Edmunds to weigh in on what matters most when you’re looking to buy a truck or car.

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You have enough saved to upgrade your ride and right away you encounter a common roadblock: How are you going to pay for your next car? If buying the brand-new car with the features you want is too expensive for your budget, you might look at leasing a new vehicle to lower that monthly payment or buying a used car with the features you want.

But if the monthly payments for buying used and leasing new are about the same, which option do you choose? We're going to look at the differences between leasing a vehicle versus purchasing a used car, what some of the pros and cons are, and how your personal situation impacts your decision.

How is leasing different from buying?

While in both situations you're making monthly payments, leasing is more like renting because you're not working toward vehicle ownership. There are also a handful of differences that include terms you should be aware of before you start a lease. You may have to make an upfront payment, which may include an acquisition fee (sometimes called a bank fee) in addition to a down payment. An acquisition fee is charged for processing a new loan. You'll also be responsible for the "money factor," which is the rate you'll pay in finance charges every month, similar to an interest rate on a loan. You may also be required to pay a security deposit.

What are the pros and cons of leasing a car?

Let's take a look at the pros and cons of leasing a car and how those might impact you.

Pro: Leasing can be less expensive than buying new

Leasing is generally the most cost-effective way to get into a new vehicle. Your down payment is likely to be smaller than if you purchased a car, and sometimes manufacturers will have special "no money down" lease deals if your credit is good enough. Some vehicles can be leased with monthly payments as low as $200 a month depending on your financial situation. If you come to the table with great credit and the ability to make a sizable down payment, it will generally be easier for you to get a low monthly payment.

Pro: A leased car comes with the factory warranty

If you lease a new car, you'll get the extra peace of mind that comes with a factory warranty. Not all warranties are created equal, and you'll want to check out its terms and conditions, but the added protection it carries could be a big bonus to leasing.

Pro: You're always driving a new car when leasing

If the latest styles, features and tech are important to you, you'll want to consider leasing. Similar to "annual upgrade" deals for smartphones, leasing a new car every two or three years is a great way to stay in the latest and greatest vehicle.

Con: You don't own a leased car

Yes, it sounds obvious, but while leasing a car you're effectively renting it from the dealership. Those payments you make never contribute to paying down the principle on a loan, like they do with more traditional financing. While it's true you can purchase the car at the end of the lease, that's a whole renegotiation with the lender. You're also subject to a contract that spells out what you can and can't do to your vehicle. Any modifications, including factory accessories, have to be removed when you turn in the vehicle.

Con: Leased cars come with mileage limits

Leased vehicles come with an annual mileage allowance; in other words, you can drive no more than a certain number of miles per year without paying a fine. Those fines can add up, starting at 15-25 cents per mile. That might not sound like much, but even at just 15 cents per mile, driving 1,000 miles over the limit is an extra $150 you'll have to pay out of pocket. If you really blow past your mileage limit, you could be stuck paying a large bill when you return your vehicle. So if you plan on taking your car on long road trips, or especially long daily commutes, you might want to consider a higher mileage allowance.

Con: You're still responsible for most wear and tear items

It's important to remember that your out-of-pocket expenses won't disappear because you're leasing a car. Just like if you were to buy the car, you're responsible for replacing wearable parts on your leased car unless otherwise noted in the lease terms. That includes getting the oil changed and replacing belts, batteries and even brake pads. Keep that in mind when you're putting your budget together.

Con: Lease contracts can be confusing

Trying to decipher what you can and can't do with your leased vehicle can be challenging. It's important to read the entire contract so you know what costs you're responsible for and what restrictions exist regarding the car. Take the time to familiarize yourself with the contract, and don't be afraid to ask as many questions as you need to feel comfortable with what you're signing.

Con: Higher car insurance costs

Insurance requirements for leased vehicles are often higher than for a financed vehicle, which could mean higher monthly insurance payments if you choose to lease. These requirements will vary based on who you're leasing the vehicle from and the state you live in, but they can include higher-than-usual injury liability limits ($100,000 per person and $300,000 per accident, for example) and property damage liability coverage that can exceed $50,000. Some states require uninsured motorist coverage too, though those rates are usually consistent with insurance requirements for purchasing a vehicle.

It's also worth keeping in mind that insurance rates are based on the actual price of the vehicle, so a more expensive vehicle is generally more expensive to insure even if your monthly payment is lower.

Con: End-of-lease costs

If you decide to return your leased vehicle instead of purchasing it or turning it in for a new model, you're likely to owe money to the dealership. The disposition fee is essentially the same as the acquisition fee you paid when you started your lease. Yes, they're charging you a fee to return the car. That's in addition to any fees that crop up following the vehicle's inspection. If the vehicle has suffered any scrapes or dings beyond what the dealership considers normal wear and tear, you're on the hook for those repairs.

What is buying a car?

This is pretty straightforward: You can buy a car by either purchasing it in full with a lump sum or by financing it with an auto loan. Financing a car usually involves making a down payment and then making monthly payments over a period of time—often between 36 and 72 months. The amount you finance is subject to an annual percentage rate (APR) that varies depending on market interest rates and your credit score. Making all the payments ends with you owning the vehicle. If it's your first time financing and you have questions, we've got answers for you here.

What's the difference between buying a new car versus a used car?

Buying a new car is just what it sounds like: It's never been owned before. A used car has had at least one previous owner, though it's possible it has had several. Buying a used car is often the most economical way to purchase a vehicle. Otherwise, the biggest difference between buying new and buying used is customizability. With a new car, you have the luxury of ordering it exactly how you want. With a used car, you need to shop carefully to find a vehicle that's already been specced out by the original owner the way you'd like it.

What are the pros and cons of buying a used car?

OK, with that out of the way: What are some advantages and disadvantages of buying a used car?

Pro: No mileage limit

It's your car, so you can drive as many miles as you want. Unlike leasing, there are no restrictions on how many miles you rack up and you don't need to worry about incoming fees just because you take a few long road trips or because you have a gnarly commute.

Pro: You can modify your car

You're welcome to make aftermarket modifications to your car because, well, it's your car! And while you might want to consider resale value when adding chrome windshield wipers, you can have peace of mind when modifying and customizing your vehicle.

Pro: No wear and tear charges

If your vehicle suffers any scrapes or scratches, you won't have to worry about paying wear and tear charges to the dealership. You'll be responsible for any repair costs, of course, but it'll be up to you to decide whether or not you want to make those fixes.

Pro: Freedom to resell or trade the car when you want

When you buy a car, you can trade it in or sell it whenever you want. That gives you an added flexibility that doesn't always exist when leasing a vehicle. Plus, you can often use the equity in your car as a down payment to purchase your next vehicle.

Pro: Sometimes cars don't change much over time

Cars are developed in generational cycles, meaning that for several years, not a lot will change. For example, a 2023 Toyota Camry isn't a whole lot different from a 2018 model, even though it's five years newer. In cases like that, purchasing a used Camry in good condition could save you a considerable amount of money and still get you the features you want.

Con: You can't custom order a used car

You can shop for your desired year, make and model when looking for a used car, but you can't custom order your vehicle quite as much as you can when shopping for a new car. You can modify your car after you've purchased it, but otherwise a used car comes as-is, which means you have to look carefully at individual vehicle specs to get the features you want. If you're looking for a specific combination of colors and features, the shopping process can be more of a challenge.

Con: You're responsible for maintenance and repair costs

If the manufacturer warranty has expired, you'll be responsible for all maintenance and repair costs. So, while buying a used car might save you money up front, you'll want to keep in mind any upcoming maintenance costs that you may be on the hook for. You may also want to look into purchasing an extended service plan to protect yourself from unexpected expenses.

Is leasing a new car or buying a used car better?

Well, that kind of depends on everything we've already talked about. Do you care more about driving a new car all the time and having the peace of mind provided by a factory warranty? Then you might want to lease a vehicle. But if keeping costs low and paying off a vehicle to get to the point where you aren't making monthly payments matters most, you might want to start a used car search.

You know your wants and needs best. It can't hurt to make a pros/cons list and then do some research on what kind of vehicles, used and new, are available before making a decision. This is a big one, so take your time!