Auto loan vs lease: compare the full cost
An auto loan buys the vehicle over time; a lease pays for its use under an agreement with mileage and condition rules. Compare both at the same end date, including what you own or still owe.
What changes when you finance a car?
With a loan you make a down payment and monthly principal and interest payments. You can typically keep, sell or trade the vehicle, subject to paying off any loan balance. After four years of a five-year loan, the car still has value and there may still be debt: both belong in a four-year comparison.
What changes when you lease?
A lease usually specifies an amount due at signing, monthly payments, allowed mileage and charges for excess wear or mileage. At the end you generally return the car or, if the contract allows it, purchase it for its buyout amount. On a return you have no vehicle to sell. The actual agreement controls taxes and end charges.
| Question | Auto loan | Lease and return |
|---|---|---|
| Vehicle at the end | You keep the vehicle, subject to any loan payoff. | You return it; no resale asset. |
| Monthly payment | Based on amount financed, contract rate and term. | Based on the written lease quote and terms. |
| Extra risks | Resale value may disappoint; you may owe more than the car is worth. | Mileage, wear, disposition and early termination charges may apply. |
Compare a realistic end date
Choose a period that matches the lease term. For an auto loan that lasts longer, add the estimated balance owed at that date to cash paid and subtract the car’s estimated resale value. For a returned lease, add due at signing, later payments and expected return charges. Buying the lease at the end is a separate path: add the full buyout including estimated tax and fees, then subtract the car value you retain.
Questions to ask before signing
- What is the out-the-door price to buy, including tax and required fees?
- What is due at lease signing, and does it include the first month?
- What mileage is included, and what are excess mileage and wear charges?
- What is the purchase option amount, with tax and fees?
- What would it cost to end the contract early?
Source: FTC, Financing or Leasing a Car. The CFPB auto loans guide explains borrowing terms. Review the actual agreements before deciding.