Auto Loans vs. Leasing 

by Steve Jones - July 7, 2022

For many people, it can be difficult to decide between leasing a car versus securing a loan to buy one. There are benefits and drawbacks to both options. Leasing a car is typically less each month, but buying your vehicle leaves you with an asset you own once the loan is paid off. 

The decision to either buy or lease is an important one. There are many factors to consider, from the cost of your monthly payment to the impact your decision might have on your auto insurance

Understanding the Difference Between Buying and Leasing 

While both leasing and purchasing a vehicle will result in you obtaining a car, the process and details are very different. The obvious primary difference between the two is that you could ultimately own your vehicle if you secure it through a loan. This is not the case with a leased vehicle, which you will not own at the end of the lease. 

It is also worth noting that until you pay off your car loan, your bank effectively owns your car. That means true ownership of your vehicle is only possible once your loan is paid off. Many lease agreements will offer you the opportunity to purchase the vehicle at the end of the lease period. Otherwise, you will need to return the car to the dealership. 

The length of these agreements also differs. Most auto leases are for between two and four years. This is shorter than the average car loan, which can last for up to six years in most cases. 

There are other factors that are the same whether you lease or buy. The law requires you to carry a minimum level of liability insurance in either case. However, your leasing company could also require additional coverage beyond the state minimums and your auto finance company if you are buying will almost certainly require more than minimum liability. 

Pros and Cons of Buying 

For many people, obtaining a loan and buying their vehicle is the best option. There are certainly benefits to this approach, but there are also drawbacks to consider. 


Owning your own vehicle comes with real benefits that are worth considering. Some of them include: 

  • Ownership of the car. Owning your vehicle provides you with an asset that is yours once your loan is paid off. You can drive the car for several years, sell it privately, or trade it in to help finance a new vehicle. You get to choose your car insurance coverage. Either way, you ultimately retain some of the money you pay each month on your car payments. 
  • Unlimited use. You are not bound by lease agreements, which means you can put as many miles on your vehicle as you want without the fear of fees. 


There are also downsides to owning a car. These include: 

  • Depreciating asset. A car is an asset, but its value only goes down from the day it is purchased. Your vehicle will always be worth less than what you paid for it. 
  • Higher upfront costs. You can expect your down payment to be higher than the upfront cost of leasing a vehicle. 
  • Car maintenance obligations. As the owner of the vehicle, you are obligated to cover all repairs and other costs associated with the vehicle. 
young african american couple at car dealership getting a lease

Pros and Cons of Leasing 

There are some real advantages to leasing a vehicle, but there are also a few downsides. For example, there are unique challenges when it comes to accidents in leased vehicles

As is the case with most things, the factors surrounding leasing a vehicle continue to change over time. In the wake of the COVID-19 pandemic, prices for leasing vehicles have become more consumer-friendly, according to Autotrader. The following pros and cons of leasing a vehicle take these changing factors into account. 


The pros of leasing a car are substantial. You not only pay less each month for your vehicle, but you will generally enjoy the car during its least-troublesome period. Some of the important benefits include: 

  • Trouble-free years. When you lease a vehicle, you typically have it when it is new and free from wear and tear. That means you are less likely to face breakdowns or other issues. 
  • Warranty. Because your leased vehicle is new and you will only have it for a few years, these vehicles are typically still under manufacturer warranty. 
  • Favorable lease terms. In some cases, the terms of the lease could provide valuable benefits. Some examples include free oil changes or annual maintenance. 
  • Walk away. At the conclusion of your lease term, you can walk away from the vehicle with no strings attached. You then have the opportunity to lease a new vehicle and enjoy all of the new safety features and benefits that come with the newest model. 


There are also downsides when it comes to leasing a vehicle. The obvious one is that you are essentially renting a car that you will never own. However, there are other downsides of which you should be aware before you enter into a lease agreement. 

  • Finance charges. The monthly payment for a leased vehicle is usually less than a loan payment. However, finance charges can actually push what you pay each month above the cost of the loan. 
  • Customization. You do not own the leased car, which means the lease agreement likely prevents you from customizing or modifying the vehicle in any way. Should you do so, you could be in violation of the agreement. 
  • Mileage. Leases limit the number of miles you can put on a vehicle annually. This restricts how often you can drive and potentially opens you up to additional costs. Every mile you travel beyond the contractual limit could result in a fee. 
  • Ownership. By leasing, you are paying for a vehicle that you may never own. There might be downsides to purchasing a depreciating asset, but owning your vehicle free and clear is still a pro. 
  • Wear and tear. Your lease agreement requires you to keep your vehicle in good condition. While some wear and tear is unavoidable, you could face additional penalties for extended damage to the vehicle. 

Consider Your Insurance Options When Deciding to Buy or Lease 

Insurance is an important factor whether you lease or own your vehicle. Bluefire Insurance is here to provide their agencies with affordable options to meet their customers’ needs. Feel free to reach us by filling out this contact form or calling us at (866) 424-9511 for more information. 

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