Keys to Vehicle Leasing: Comprehensive Consumer Guide logo links to Comprehensive Consumer Guide home page Glossary Photograph of cars in traffic
Leasing vs. Buying


Leasing Buying
You do not own the vehicle. You get to use it but must return it at the end of the lease, unless you choose to buy it.
You own the vehicle and get to keep it at the end of the financing term.

Achieving full ownership. When buying a vehicle with cash, you receive immediate ownership of the vehicle. When purchasing a vehicle with an installment sales contract or loan, you pay down the loan balance and eventually build equity in the vehicle. You receive full ownership of the vehicle after you make your final payment.

Conditions on vehicle use. A lease agreement gives you the right to use a vehicle for a specified period, subject to various conditions. Those conditions typically state
  • The maximum mileage allowed without further payments
  • Insurance requirements for the vehicle
  • Maintenance and use requirements
  • Limitations on vehicle alterations
  • Restrictions on subleasing
  • Limitations on drivers
  • Other restrictions designed to ensure that the vehicle will be in good operating condition at the end of the lease.
Conditions on vehicle use. The finance agreement typically has conditions designed to protect the creditor's security interest in the vehicle. Those conditions state
  • Insurance requirements for the vehicle
  • Maintenance and use requirements
  • Restrictions on renting or leasing and other restrictions designed to ensure that the creditor's security interest is protected and the vehicle's value is not impaired during the term of the finance agreement.

Right to purchase. Most leases give you the right to purchase the vehicle at lease-end. The purchase price, or method of determining the price, is stated in the lease agreement. Otherwise, there must be a statement in the lease disclosure that you do not have a purchase option at lease-end.

Duty to return the vehicle. If you do not purchase the vehicle at the end of the lease, you must return the vehicle to the lessor (the leasing company) or to the party designated by the holder of the lease agreement.

Loan options. A vehicle's loan balance or installment sale balance may be repaid before the end of the term, subject to any stated prepayment charge. At the end of the term, you own the vehicle. You may sell it, trade it, or keep it.
Registration and titling. You are responsible for registering the vehicle according to the specific requirements of the lessor and those of the state in which the vehicle is garaged. However, the title to the vehicle remains in the name of the lessor or the company to which the lease is assigned (the assignee). If you purchase the vehicle, it will be retitled in your name and the new title will note any lienholder that provides financing for the purchase. Registration and titling. The title to the vehicle is in your name but notes the lienholder during the term of the finance agreement. When all payment obligations are met, the creditor will release the lien.

Next: Up-front costs

Vehicle Leasing home | Comprehensive Consumer Guide home

Home | Consumer information
Accessibility | Contact Us
Last update: May 5, 2003