Loan vs. Lease: Which is Better for Your Next Car?

Car loan vs. lease: which fits you?

Loans lead to ownership with higher payments but freedom and no mileage caps. Leases lower the payment but limit miles and you return or buy at lease end. Pick based on how long you keep cars, how much you drive, and your budget.

Quick comparison

Feature	Loan	Lease
Ownership	You own after payoff	You return or buy at end
Monthly payment	Higher (paying principal)	Lower (paying depreciation)
Mileage	No restrictions	Caps with overage fees
Customization	Allowed	Not allowed
End-of-term	Keep, sell, or trade	Return, buy, or lease again

Choose a loan when

• You drive high mileage or vary routes a lot.
• You plan to keep the car long enough to enjoy payment-free years.
• You want freedom to modify or sell anytime.

Choose a lease when

• You want lower monthly payments and drive predictable, moderate miles.
• You prefer a new car every few years with warranty coverage.
• You are comfortable with end-of-lease inspection, fees, and potential buyout.

Key costs to compare

• Interest/APR vs. lease money factor (convert to APR to compare).
• Down payment/drive-off, acquisition fee, disposition fee, and dealer add-ons.
• Residual value and buyout price vs. expected market value at lease end.
• Mileage overage and wear-and-tear charges; gap coverage inclusion.

FAQs (top questions)

Is leasing always cheaper?

Monthly, often yes; total cost can be higher if you lease continuously versus owning a car for many years.

Can I negotiate a lease?

Yes. Negotiate the sale price (cap cost), money factor, fees, and whether gap is included.

What if I exceed mileage?

Expect per-mile overage fees. If you consistently exceed caps, a loan is usually better.

Is buying the car at lease end a good deal?

Compare the buyout to market value. If the residual is low versus market, buying can be a bargain.

Do leases include gap coverage?

Often, but not always. Confirm and add gap if not included.

Internal Links

• See personal loan vs. auto loan if buying outside dealer financing.
• Read loan terms to avoid before signing.
• Plan payments with repayment strategies.

External resources

• CFPB on vehicle leases

Conclusion

Choose a loan for ownership, unlimited miles, and long-term value. Choose a lease for lower payments, frequent upgrades, and predictable miles. Run the numbers on total cost, miles, and buyout vs. resale before deciding.