When it comes to cars, there are two types of people. There are those who grow attached to a set of wheels and drive their beloved clunker into the ground before even considering a visit to the dealership. Then there are the folks who live for that leathery new car smell, an odometer at zero, and all the latest gadgets and gizmos that’ll fit on the dash.

If you’re ready for a new vehicle but aren’t sure if buying or leasing is right for you, start by considering which type of car person you are — it may make your choice obvious. Somewhere in between? Not to worry. We’re here to help you decide if you should lease or buy a car based on what’s best for your (and your automobile’s) future.

What is a lease, exactly?

A car lease is simply a financing option where you pay to drive a vehicle for a predetermined amount of time (often three years). When you sign up, you agree to make monthly lease payments for the duration of the contract, plus a down payment (in some instances). You can lease both new and used cars. 

Should you lease a car?

Ultimately, your lifestyle and wants and needs will determine whether or not a lease is a good option for you. Here are a few lifestyle considerations:

Working 9 to 5

Do you drive a lot for work and have your car expenses reimbursed by your employer? Or does your work situation allow you to deduct your driving-related expenses on your taxes? Check your employer’s policy details, but in both these instances, leasing a car might be a good option.

The ‘It’ factor: newness

Leasing is also attractive if you like to swap out your wheels for new ones (or new to you) every few years. Some drivers go from lease to lease because they like always having a brand new car.

Four figure fixes

You might also be interested in leasing if you don’t want to be on the hook financially for unexpected repairs and regularly scheduled maintenance. A leased car is often less likely to need significant repair work, and maintenance is often covered by a warranty. (Although you will typically be responsible for paying for oil changes and new tires, if need be.)

Ready for commitment?

Leasing a car can also provide you a lot of flexibility — but not necessarily when you’re in the middle of a lease agreement.

If you decide you want to get out of a lease early, you will be required to cancel the lease agreement prematurely, which can result in some sizeable fees, including an early termination charge and a bill for the remaining amount owed on the lease.

For example, if you have one year left on your agreement and you pay $350 in lease payments each month, you could owe $4,200, plus an early lease termination fee.

Another option? If your lease allows it, you can have someone take over your lease by posting an ad on a site like Swapalease.com or Leasetrader.com. Both of these sites charge a commission fee, but paying it could be cheaper in the long run.

Is your credit score high enough for a lease?

Whether you are buying or leasing, your credit score matters. But leasing may require a higher score in order to get the lowest monthly payments. At the end of 2018, the average credit score for those leasing a new car was 724 and 715 for those financing a new car (and even lower for those buying a used car).

While it may be possible to lease a vehicle with a lower credit score, it could leave you with high monthly payments. But don’t be discouraged. If leasing is your goal, you can improve your credit score by chipping away at credit card balances and regularly paying all your bills on time.

Should you buy a car?

Put a ring on it

If you plan to keep a car for more than several years (or don’t care about the latest auto doodads), buying a car can be a better choice. That’s because even if you finance a vehicle after making a down payment, you build equity with every payment. Once it’s paid for, your vehicle is an asset that’s yours — continue to drive it for relatively no cost, sell it and pocket your earnings, or trade it in and get some cash to put towards a new purchase.

Just don’t forget about depreciation. Because cars depreciate in value, selling a car quickly after buying may not be in your wallet’s best interest.

Let freedom ring

If you have a long commute, love to take weekend getaways, or are a road trip fanatic, buying a car may be the right choice for you — there’s no mileage limit when you own a car.

On the other hand, when you lease, your agreement typically includes a mileage limit on the vehicle. Exceed it and you’ll have to pay a fee based on the overage, which could run you 10 to 30 cents per mile — and that adds up quickly. Go 5,000 miles over your limit? You may be looking at $500 to $1,500 extra when your lease ends.

Be a responsible adult

The downside of car ownership: If something breaks or you’re in an accident, you’re responsible for paying for any charges not covered by your insurance. And with the technology housed in some of today’s cars, that can be a costly proposition.

Your manufacturer’s warranty may not cover the costs associated with repairing or replacing many of your car’s technology components. (Not to mention that it will eventually expire.) A vehicle service contract, like our Flex Coverage, can help protect you against expensive out-of-pocket repairs.

Different routes, similar charges

Whether you decide to buy or lease, you should expect some of the costs to be the same. With both options, you’ll likely have a down payment, as well as “TT&L,” or tax, title, and license costs (which includes state and local taxes, documentation fees, and DMV registration fees).

If leasing, you may want to get guaranteed asset protection, or GAP insurance — check to see if it’s included in your lease. GAP insurance covers some or all of the difference between what your car is actually worth (accounting for depreciation), and what your outstanding balance is if your car is stolen or totaled.

When you’re ready to hop into a new set of wheels, you’ve got a lot to consider — and your tenure of the car is one of them. Is this the minivan that you’ll drive on road trips with your kids for summers to come? Or would you be happy to trade in this sedan for a newer, shinier model in a couple years?

Both buying or leasing a car can have benefits and downfalls. Having a car is a large expense, so you need to take your lifestyle and what you want (and need) from it into consideration before signing any contract.

Explore your auto financing options with us.