Finance 101
November 3, 2021

The Pros and Cons of Leasing vs. Buying

When you need to purchase big-ticket items such as cars, appliances, or furniture, you typically have two methods of payment from which to choose: buying or leasing. While most people think purchasing items outright is the best option, that isn't always the case. The choice to lease also comes with its own benefits. But how do you know which option is right for you?

The best way to choose a payment method is to first evaluate the pros and cons of each and see which works best for your financial situation.

What Is the Difference Between Leasing and Buying?

To buy or purchase an item means to acquire it by paying for it outright, either in a lump sum or in installments (as in financing) for eventual ownership.

To lease an item means to pay for it for a fixed amount of time in (typically) monthly installments for the privilege of using it. You do not own the item during the leasing period; the lessor does. At the end of the predetermined term, you either return the item or you could then have the option to purchase it.

Pros of Leasing

Leasing has many advantages over buying:

  • Leasing helps you afford more things on a tighter budget. Your initial expense will be less, and you can obtain the goods you want without a large payment upfront. This option can fit better into your regular cash flow.

  • You could afford to lease a top brand that you wouldn't have otherwise been able to buy, and you can update the look of your home or have a new car every few years.

  • Leasing offers more flexible payment terms. There are a number of different leasing options that could fit your needs, and there are different durations of leases available.

  • While repair and maintenance costs are dependent on your lease type, they can be covered or significantly reduced by the owner (or lessor) of the merchandise.

Cons of Leasing

Some of the cons of leasing you should keep in mind are:

  • At the end of your lease term, you won't have anything to show for it. You'll have to return the item, purchase it outright, or renegotiate your lease.

  • With a car lease, you will be beholden to excessive mileage penalties. Also, in the case of cars and other items, you will be charged fees for excessive wear and tear upon return of the items after your lease terms expire.

  • You are beholden to pay the lease for the entire term and could be subject to an additional fee if you decide to return your leased item early.

  • There's a higher overall cost to leasing vs. buying an item outright.

Pros of Buying

On the flip side, there are some advantages to buying.

  • Buying gives you the security that you own something, even when you're finished paying for it.

  • Purchasing items outright almost always saves you money in the long term.

  • Because you own the car, furniture, or appliance, you are free to turn around and sell it whenever you like.

  • Buyers can benefit from tax incentives for some newly purchased assets in their first year.

Cons of Buying

Reasons why buying isn't for everyone include:

  • Maintenance and repair costs will be up to the owner of the item.

  • Buying requires a higher initial expense in the form of a down payment or payment in full upon purchase.

  • You could get stuck paying high interest rates if you choose to finance a purchased product.

  • In the case of appliances, televisions, or equipment, you could be stuck with aging, outdated items until you can afford to purchase or lease again.

How to Know Which Works Best for You

Ultimately, the choice to lease or buy is up to you and depends on many of the factors listed above, including your budget, your long-term goals, and your current needs.

If buying isn't for you at this time and you want to consider leasing, services such as TEMPOE and WhyNotLeaseIt offer customers a wide variety of adaptable lease terms that can make leasing easier on your budget.*

For more information on making knowledgeable financial choices, visit our Finance Academy.

*This is a lease transaction. Must be at least 18 years old and income requirements apply. The lease has a 5-month minimum term (“Initial Term”). Lease requires consumer to make an initial payment at lease signing, plus set up weekly, biweekly, or monthly lease payments. After fulfilling the Initial Term, you may: (1) continue to lease by making periodic payments in accordance with the terms of the lease agreement; (2) exercise a purchase option per the terms of the lease agreement (purchase option not available in NJ, VT, WI, or WV); or (3) return the leased items to TEMPOE. Program details and purchase options, if available, may vary by retailer and state. Please refer to your lease agreement for full program details and purchase options, if available.