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Deciding whether to lease or buy a car depends on your budget, lifestyle and driving habits. This article breaks down the pros and cons of each option and offers tips to help you make the best decision.
If you’ve decided buying a car is right for you, why not work with a trusted brand like AAA for your car loan needs? Apply online in minutes and enjoy fast approvals and low member rates.
Start Shopping Today| Feature | Buying | Leasing |
|---|---|---|
| Ownership | Yes, you own the car outright. | No, you’re renting the car. |
| Monthly Payments | Higher, but builds equity. | Lower, but no equity. |
| Mileage Restrictions | None. | Yes, typically 10,000–15,000 miles/year. |
| Customization | Allowed. | Not allowed. |
| Long-Term Costs | Lower after loan is paid off. | Higher due to continuous payments. |
When deciding whether to buy or lease a car, start by considering your goals. Do you enjoy paying off a loan and owning your vehicle outright, or are you comfortable with a cycle of continual car payments in exchange for driving a new car more frequently?
Answer these quick questions to find out whether leasing or buying is the best option for you! 🚗
When you buy a car, you make payments to a lender and can care for or modify the car in any way you wish. No matter how many miles you put on the car or what condition you keep it in, it’s yours provided you make your monthly payments on the loan, in addition to any interest.
The process of buying a car generally starts by getting pre-approved for car financing if you don’t intend to pay cash. While many dealers offer financing, getting pre-approved puts a little more borrowing power in your hands and affords you the potential for a lower interest rate.
Once at the dealer, you begin the test drive phase, any trade-in assessments and price negotiations. Before signing a deal, compare loan offers and any financing agreements carefully to ensure they align with your budget. If satisfied with the terms, you then complete the necessary paperwork to finalize your purchase.
Generally, the people best suited for buying a car via traditional loan or cash are those who value ownership, drive high miles and can afford the long-term expenses of maintenance and repair. There are other factors, however, that can make car buying a less-than-ideal scenario for many. Let’s look at some of the pros and cons of purchasing a car the traditional way:
Car leases are like renting; you’re paying to drive a vehicle for a specified amount of time without the benefit of ownership. And while you may have the option to purchase the vehicle once your lease is up, your monthly payments throughout the lease won’t directly go toward ownership.
Once you decide on the type of vehicle you want, the car lease process should begin by researching different lease terms and mileage allowances. Be mindful of over-mileage charges associated with any lease agreement; if you anticipate that you’ll drive more miles than the allotted terms, consider other alternatives. At the time of lease termination, many people are caught off guard by the fees associated with exceeded mileage.
After you’ve found a lease with mileage terms you’re comfortable with, consider things like residual value (i.e., what the car will be worth at the end of the lease) and any trade-in value that can be applied toward your monthly payment.
Also, look for manufacturer lease deals or incentives that can help further lower the lease price. Once you agree to all terms and conditions, the dealer will handle the necessary paperwork to get you out the door and on the road in your new lease.
There can be real appeal in driving a newer-model car every couple of years, and for many, leasing provides a viable way to do this. Provided you can stay within mileage limits and take good care of a vehicle, leasing may make the most sense.
There are some specific terms and conditions that are part of most lease agreements; however, unless you know what those are in advance, you could face surprise charges and penalties at the time of termination. Let’s take a closer look at the pros and cons of leasing:
Compare the costs of leasing and buying a car to see which option works best for you. 🚗
Whether you’re buying or leasing, knowing how to negotiate can help you save money and get terms that work in your favor. Here are a few strategies to keep in mind:
When contemplating the decision to buy or lease a new car, careful calculations around budget, a realistic view of your driving needs, and a full understanding of the loan or contract conditions will help you put yourself in a confident negotiating position and ultimately reach the right agreement.
Be sure to exercise a few hypothetical scenarios to see how buying vs. leasing can stack up over the short and long term and remember that what works for one person may not work for another. Each situation is different and options for acquiring a new car are available for this reason.
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If you’ve decided buying a car is right for you, why not work with a trusted brand like AAA for your car loan needs. Apply online in minutes and enjoy fast approvals and low member rates.
It depends on your priorities. Leasing often has lower monthly payments but no equity, while buying can save money in the long term once the loan is paid off.
Most leases allow 10,000–15,000 miles per year. Exceeding this limit can result in additional fees, typically $0.10–$0.25 per mile.
Yes, you can negotiate the capitalized cost (the car’s price) and other terms, such as mileage limits and fees.
Ending a lease early can result in significant penalties. Check your lease agreement for early termination fees and options.
Buying allows you to build equity, avoid mileage restrictions and customize your vehicle. Once the loan is paid off, you’ll also eliminate monthly payments.
Leasing offers lower monthly payments, warranty-covered repairs and the ability to drive a new car every few years without the hassle of reselling.
Consider your budget, driving habits and long-term goals. If you drive a lot or want to own your car, buying may be better. If you prefer lower payments and a new car every few years, leasing might be the way to go.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
†Annual Percentage Rate (APR). Auto Loans. Rates and terms effective as of 6/23/2025. APR is accurate as of 6/23/2025. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Offer valid on personal vehicle loans only. Criteria to receive the stated APR: Loan term 48 months or less new or used, model years 2019 – 2025 with a credit score of 740 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. AAA Banking uses a managed credit program, and final APR is dependent on your credit score. An auto loan with an APR of 5.24% for a $20,000 loan at a term of 48 months, your estimated monthly payment would be $463. An auto loan with an APR of 5.49% for a $20,000 loan at a term of 48 months, your estimated payment would be $465. Private party sales will not be financed. Auto loans are offered by Grasshopper Bank, N.A. Member FDIC.
††Annual Percentage Rate (APR). RV Loans. Rates and terms effective as of 3/7/2025. APR is accurate as of 3/7/2025. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Criteria to receive the stated APR : Loan term 48 months or less, $5,000 minimum loan amount, model years 2023-2025, with a credit score of 720 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. AAA Banking uses a managed credit program, and final APR is dependent on your credit score. An RV loan with an APR of 7.49% for a $35,000 loan at a term of 48 months, your estimated monthly payment would be $846. An RV loan with an APR of 7.74% for a $35,000 loan at a term of 48 months, your estimated monthly payment would be $850. RV loans are offered by Grasshopper Bank, N.A. Member FDIC.
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The figures entered on the input page of this calculator are for hypothetical purposes only. You should enter figures that are appropriate to your individual situation. The results provided by this calculator are also intended for illustrative purposes only and accuracy is not guaranteed. This calculator is not intended to offer any tax, legal, financial or investment advice and does not assure the availability of or your eligibility for any specific product offered, nor does this calculator predict or guarantee the actual results of any product. The terms and conditions of products offered will differ and may affect the results of the calculator. Please consult with qualified professionals to discuss your situation. The final APR may differ from the APR in the above results due to additional fees that may be applicable.
1Triple Advantage Savings Annual Percentage Yield (APY) is accurate as of 4/1/2025. The minimum amount to open an account is $100.00. Triple Advantage Savings Account Holders can earn the following Annual Percentage Yield (APY): 3.50% APY with Eligible AAA Membership and 3.15% APY without eligible AAA membership.* Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
2Triple Advantage Savings account holders with a monthly average balance of $25,000.00 or greater receive free outgoing domestic wire transfers. Triple Advantage Savings account holders with a monthly average balance of $24,999.99 or less will be charged a $10 fee for each domestic outgoing wire transfer.
3Triple Advantage Certificate of Deposit (CD) Annual Percentage Yield (APY) is accurate as of 4/14/2025. The minimum deposit to open an account is $500. 4.25% APY applies to a 6-month CD with balances of $500.00 and up. 4.20% APY applies to a 9-month CD with balances of $500.00 and up. 4.10% APY applies to a 12-month CD with balances of $500.00 and up. 3.95% APY applies to an 18-month CD with balances of $500.00 and up. 3.75% APY applies to a 24-month CD with balances of $500.00 and up. 3.50% APY applies to a 36, 48, and 60-month CD with balances of $500.00 and up. CDs are opened and interest begins on the day the funding deposit is received. The interest rate and APY are fixed for the term of the CD. The APY assumes interest remains on deposit until maturity. Withdrawal of interest before maturity will reduce earnings. A penalty may be imposed for early withdrawal. Fees may reduce earnings on the account. Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
Early Withdrawal Penalties
An early withdrawal penalty will apply if you withdraw funds before the maturity date. For terms of 6 to 12 months, the penalty is 90 days of interest. For terms of 13 to 60 months, the penalty is 180 days of interest. In accordance with Regulation D, a minimum penalty of 7 days’ simple interest will apply to withdrawals made within 6 days of deposit or within 6 days of a previous withdrawal.
4Triple Advantage Checking Annual Percentage Yield (APY) is accurate as of 4/1/2025. The minimum amount to open an account is $100.00. Triple Advantage Checking Account Holders can earn the following Annual Percentage Yield (APY): 1.00% APY with eligible AAA membership and 0.75% APY without eligible AAA membership.* Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
5Cash Back rewards offer 1.00% cash back on all qualified purchases made by eligible Triple Advantage Checking account holders with an eligible AAA membership.* To qualify for cash back, Triple Advantage Checking account holders must meet all requirements and a transaction must be deemed as a qualified purchase.
Qualified purchases are signature-based purchases made with a AAA Banking debit card from a Triple Advantage Checking Account. To make a signature-based purchase, select “credit” rather than debit at point-of-sale kiosks. The “credit” option is most often pre-selected when making purchases online using a debit card. Online subscription payments may not be considered signature-based purchases. The payment transaction type (signature-based or other) is ultimately decided by the merchant and how the transaction is transmitted to AAA Banking at the time of processing. AAA Banking reserves the right to determine if a transaction was a qualified purchase, and to establish additional types of qualified purchases that could be made available in a variety of ways. Any goods or services purchased with the debit card that are returned or otherwise credited to the account are not qualified purchases. Unlawful purchases and purchases of currency, cash or cash equivalents (including, without limitation, currency from the U.S. Mint, travelers cheques, gift cards, cryptocurrency, casino chips, peer-to-peer payments, prepaid debit cards, account openings, loan payments, or other cash equivalents) made with a debit card are not qualified purchases. Documentation may be required to validate that certain purchases are qualified purchases. If you or AAA Banking closes the account for any reason before the end of the statement cycle, you will forfeit all rewards accrued through your linked debit card during that statement cycle. The AAA Banking Visa® debit card is issued by Grasshopper Bank, N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted.
Important Tax Information
The value of this reward may constitute taxable income and may be reported to the Internal Revenue Service as miscellaneous income to the first signer on the account, in the year received, as required by applicable law. Offer is limited to clients who are citizens of the United States that furnish or have a valid Form W-9 on file and the account must not be subject to backup withholding. You may be issued an Internal Revenue Service Form 1099 (or other appropriate form) to you that reflects the value of such reward. Please consult your tax adviser, as AAA Banking does not provide tax advice.
*Eligible AAA Membership Definition: you must be a "Basic," "Plus," or "Premier" member of AAA - The Auto Club Group (ACG). ACG serves households in Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, New York, North Carolina, North Dakota, South Carolina, Tennessee and Wisconsin. Applicants must be 18+ and a U.S. resident. Other AAA memberships are not eligible.
AAA-Member Verification & Product Eligibility
By applying for a AAA Banking deposit account, you acknowledge and agree that if you select a AAA-member product, your AAA membership status with Auto Club Group (ACG) will be validated at the time of account opening and periodically thereafter. If your AAA membership cannot be validated or your membership status changes, your account may be moved to a non-member product with different terms, including but not limited to a lower Annual Percentage Yield (APY) and the removal of other AAA member-only benefits. If this occurs, you will receive a notification regarding the change in the product and applicable terms. If you believe your AAA Membership status was incorrectly validated or that you have been placed in the incorrect product, please contact us to review and correct your status.
‡Offer valid through 9/02/2025. Offer valid for Classic/Basic Memberships only. Pricing valid at member join only. Offer excludes Motorcycle coverage. Payment of full AAA Membership dues is required upon renewal. Offers, terms, conditions and restrictions apply and are subject to change without notice. Not combinable with any other offer. Offer not valid in FL, GA, MI or PR. A member can add one eligible family member for free for up to one year. Additional Associates are half price. Associate memberships are available to the Primary member’s spouse, one other adult living in the household, and their children living at the same residence or away at school. Associate members must have the same type of membership as their Primary member, with the exception of Motorcycle. Associate membership expires on the renewal date of Primary member.
Upon activation and with proper identification, AAA will provide regular AAA services and full privileges for the new member. Roadside benefits begin three days after payment of dues. Some restrictions apply. Roadside assistance is provided by independent facilities contracted by AAA. Coverage in taxis, limousines and other ride-sharing conveyances is excluded. Visit AAA.com/MemberHandbook for details about member benefits, including any limitations or restrictions. Offers, terms, conditions and policies are subject to change without notice. Savings partners subject to change. Source: 2023 AAA U.S. Market Track national surveys. Includes service vehicles owned by clubs and service vehicles owned by third parties under contract with AAA to provide services to AAA members. Taxes, fees & options excluded. Terms apply. Partners and offers are subject to change and restrictions apply. For a complete list of offers, visit us online at AAA.com/Save or your local AAA office.
