LOAN VS. LEASE

When choosing between a loan and a lease, you’ll need to consider everything from your monthly budget to your annual mileage. Think about these factors now, and you’ll have greater peace-of-mind for years to come.

Loan

Loan contracts are usually signed for four to six years. The higher monthly payments can make driving a new or expensive vehicle every two to four years unpractical.

Lease

Lease terms are usually between two to four years. The shorter term and lower monthly payments allow you to drive a new and more expensive vehicle every two to four years.

Loan

You and the bank own the vehicle. There are restrictions of where you can take it and the bank holds the title until the vehicle is completely paid off.

Lease

You don't own the vehicle. Unless you decide to purchase it, you must return it at the end of the lease.

Loan

Up-front costs usually include down payment, taxes, registration fees, and other minor charges. This amount is usually larger when compared to a lease, especially if you want an expensive vehicle with a low-to-moderate monthly payment.

Lease

Up-front costs usually include first month's payment, a security deposit, a down payment, taxes, registration fees, and other charges. However, if you take into consideration the total cost of the vehicle and the monthly payment that you want, the sum is usually less than the up-front costs of purchasing.

Loan

Monthly loan payments are based on the total amount of purchase price, plus interest charges, taxes, and other fees. They are usually higher than monthly lease payments. The insurance premium is usually lower.

Lease

Monthly payments are calculated based on the vehicle's depreciation during the lease term, rent charges, taxes, and other fees. They are usually lower than monthly loan payments. The insurance premium is usually higher.

Loan

You are responsible for paying off the loan. At the end of the loan term, you keep the car. What you do with the vehicle then is entirely up to you.

Lease

If you decide to sell or trade in the vehicle at the end of the loan terms, the risk of its future value is yours. Otherwise, the lessor bears the risk of the future market value. If you turn in your vehicle prior to the end of the lease you are responsible for any early termination charges stipulated on the lease contract. At the end of the lease, you are required to return the vehicle and pay any end-of-lease charges.

Loan

You are responsible for the maintenance of the vehicle.

Lease

You are responsible for the maintenance of the vehicle during the lease term.

Loan

The vehicle is yours. Drive it as you please. But remember that higher mileage means higher wear on the vehicle, which means you’ll get a lower resale or trade-in value.

Lease

The vehicle is not yours. There’s a limit on how many miles you may drive it. You’ll pay extra charges at the end of the lease if you exceed this limit—or if the lessor determines that you’ve put excessive wear on the vehicle.