When it comes time for car shopping, you may think about leasing versus buying. Both options have their advantages and disadvantages, and there is not always a clear path forward. That said, many people find that a car loan makes more sense than a lease. After consumers pay off a car loan, they don’t have to continue making monthly payments like they would if they kept leasing.

Consumers Usually Are Better Off NOT Leasing

The reality is that, while leasing may seem attractive, it is not necessarily the better choice in many situations. Its disadvantages include these:

  • Leasing costs more than a car loan in the big picture because you lease a vehicle when it is rapidly depreciating.
  • Lease payments last forever if you always lease versus own.
  • You risk paying charges for extra wear and tear if you don’t keep the car in good condition. Children, pets, and passengers can take their toll on vehicles.
  • You pay an excess mileage penalty if you go over your allowable miles, and you don’t get an unused miles credit if you stay under your miles.
  • Early termination fees and penalties can be costly if you decide you would rather not drive a particular vehicle.

Of course, leasing does have advantages. For example, you get to drive a new vehicle covered.You can choose among cars with features and specs you might otherwise lack the money to afford. If you own a business and drive the leased car for business purposes, you could realize worthwhile tax savings.

Some people also enjoy leasing because .

When Leasing Makes Sense

Leasing could make sense if you want to drive the most recent vehicles every few years, want as little hassle as possible, prioritize low monthly payments, and can work with limitations on mileage, wear and tear, and so on. You must also be OK paying for any tire replacements out of pocket, another risk of leasing.

It is possible for people with excellent credit to negotiate more favorable lease terms than what is advertised. Do be aware that dealerships typically only do this on slow-selling vehicles that may not be your cup of tea, anyway.

Lease terms tend to last for three years. Unfortunately, back-to-back three-year lease terms (for a total of six years) can cost you many thousands of dollars more than taking out a three- or five-year car loan. However, if you would otherwise be taking out car loans and trading in vehicles every three years, leasing could make sense rather than constantly paying loan finance charges.

Never Lease Without Running the Numbers

It is important to fully educate yourself on the financial disadvantages of leasing. It is fine if you still decide to lease, but at least you have gone into it with your eyes open.

Auto loan rates typically give you a better deal than leasing. Even a loan for six or seven years can net you savings compared with leasing. Loan payments do tend to be higher monthly compared with leasing. With a loan, you pay off the entire cost of a car plus finance charges, interest, taxes, and fees.

The upside is that once the loan term ends, you don’t have to pay the loan anymore. You’re paying nothing at all per month for potentially many years, while a lease means you’re still paying every month. You can also drive more than the 15,000 miles a year that you might be limited to under a car lease. (You can get a higher limit, but it would raise your monthly payment.)

Overall, taking out a car loan makes more sense than leasing a car. Whichever way you go, gather as much information as possible beforehand, and consider all terms.