When you finance a car, you’re taking out a loan to pay for it. When you lease a car, you sign an agreement that says you’ll make monthly payments for a period of time before returning the car when your lease contract is up.
Once you’ve paid off your loan for a car you’ve financed, you become its owner.
However, a car you lease is never technically yours. After your leasing contract is up, you must return the car to the dealership.
When you take a loan out on a car, lenders typically require you to pay a down payment, taxes, registration, and other fees. When you lease, you’ll typically need to pay the first month’s payment and a security deposit, as well as taxes, registration, and possibly a downpayment.
Because your loan is for the entire value of the car, you’ll typically pay a higher monthly payment when you finance a car. When you lease, you’re paying off the vehicle’s depreciation (and other fees), and you’ll therefore have a lower monthly payment by comparison.
When you finance a car, it will eventually belong to you, so you’re free to put on as many miles as you wish. Other than having to live with them, you won’t be penalized for any damages you do to your car.
When you lease, you’re required to keep the mileage below an agreed-upon number. If you return the car with damages or go over the agreed-upon mileage, you must pay penalties according to your lease agreement.
Your Car’s Value
After you pay off your loan, you can trade-in your financed vehicle for cash or a new car. Whatever the car is worth is money that belongs to you.
A leased vehicle belongs to the dealership. When the lease expires, you do not own it.