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Leasing vs Buying: The Fundamental Trade-off
When acquiring a new vehicle, the primary financial choice is between leasing and buying. Leasing is essentially renting the vehicle for a fixed term (typically 36 months). You pay for the vehicle’s expected depreciation during that term, plus a finance charge (known as the money factor). At the end of the lease, you return the car.
Buying means you own the vehicle. If you finance the purchase, your monthly payments pay down the principal balance of the loan. When the loan is paid off, you own the asset outright. Buying typically has a higher monthly payment, but you build equity over time, whereas leasing has a lower monthly payment but leaves you with zero asset value at the end of the term.