How To Know Whether To Lease Or Finance

saleswoman holding clipboard with documents and car key on top waiting for man to sign documents

You’re finally ready for a new car. However, you’re not sure whether you should lease or finance. Both options come with pros and cons, so it’s important to compare the two. This information will make the decision easier.

What’s the Difference

The first step is to understand the difference between leasing and financing. With leasing, you make a payment for a specific amount of time. Typically, that’s between 36 and 48 months. As part of the lease, you agree not to go over predetermined miles. In addition, once the contract ends, you can trade the vehicle in for a new or newer model.

In comparison, when you finance a vehicle, you make payments to a lending institution. Once you pay the loan in full, you receive the title.

Leasing Pros and Cons

Here are the reasons that leasing makes sense, as well as some considerations:


Usually, the payment amount on a leased vehicle is less than with a financed car. As long as you abide by the contract, that rate doesn’t change. For instance, if you drive over the set number of miles in the lease, you could pay more each month.

There’s also the benefit of residual value with a leased automobile. As an example, once the contract ends, the dealership factors in the depreciation of the car’s value. That means if you decide to purchase a vehicle you leased, the residual value is what you pay.

In some cases, a dealership will allow you to make a down payment on a leased car. So, the more money you put down, the less you would pay each month. However, not all experts recommend this. That’s because you’re essentially giving the money right back to the dealership.

With the lease over, you can either purchase the leased vehicle or decide to lease a new or newer model. That eliminates the hassle of trying to sell it as you would when buying a car. That means every two to three years, you get to enjoy an amazing ride. For a lot of people, that’s the biggest advantage of leasing over financing.

In addition, because you’re always driving a new or newer vehicle with a lease, it’s under warranty. As a result, you don’t need to worry about maintenance issues.


When leasing, you’re restricted as to what you can do. Along with staying under the agreed mileage, you couldn’t make modifications. For instance, if you wanted to add a spoiler, whether you can do that will depend on the contract. So, you lose some control when leasing.

Financing Pros and Cons


Even while making payments to the finance company, you don’t have restrictions about what you can and cannot do. Simply put, financing allows you to modify your vehicle when and how you want.

To buy a car, a lending institution will check your FICO score. The good news is that even if you have less-than-perfect credit, many banks and credit unions will still approve you. However, a lower credit score means you’ll pay a higher rate of interest.

There’s the possibility of tax deductions. For instance, if you drive a car for business, you can write off certain things.


Over time, your vehicle will depreciate. So, when you decide to sell, not only do you need to find a buyer, but you also accept significantly less than what you paid. On average, vehicles lost between 15 and 25 percent of their value within the first five years after purchase.

In addition, if you buy a previously owned vehicle, it won’t have a warranty. Therefore, the cost of maintenance falls on you.

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Weighing Your Options

As you can see, there are pros and cons for both leasing and financing. No matter which route you take, Doug Henry Ford of Ayden in Ayden, North Carolina, has leasing and financing options available. Swing by the dealership to talk to our team today.

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