Banking and Finance

Buy or Lease? Which is a Better Option for Getting a Car?

Elizabeth
May 29, 2020

At the beginning of 2020, approximately 30% of cars leased in the United States were new cars, leading one to wonder: is it better to lease or buy if you’re in the market for a new car? What about a used car?


There are clear differences between buying a car and leasing a car and the answer to which one is better for you lies in your financial situation and how you will use the car. Leasing is often better for those who rarely put mileage on a car while buying is a better long-term option for those interested in owning a car after the lease is up.


Want to know which is the better option for you? Read on.

Differences Between Buying & Leasing a Car 

Most people seem to have a bit of confusion surrounding the difference between a lease vs. finance contract on a car to purchase it as the owner.

Let’s say you see a brand new Chrysler Jeep that you want to take home with you but you don’t have the cash to pay for it all upfront. Your two choices are to lease or finance the car.

When you lease a car, you never technically own it. 

When you finance a car, you would be making payments on it until you pay off the car. You don’t technically own the car until you pay it off, but once you do, it’s all yours!

They sound similar, right? We suppose they kind of are. But, they both have their own pros and cons when it comes to contract terms, cost, and overall value.

Requirements for Auto Leasing & Auto Loans

Whether you’re purchasing a car or leasing a car, your credit score is going to play a big part in the process. Let’s talk about buying a car first. 


What’s the credit score needed to buy a car? Most people need to take out an auto loan in order to buy a car. Most lenders require a credit score of at least 660 for auto loans with interest rates under 6%. While you can get an auto loan with a credit score lower than 660, you’ll either have to compensate by making a larger down payment or by accepting a loan with a higher interest rate that will cost you more in the long run.


What’s the credit score needed to lease a car? When leasing a car, the dealership is likely to look at more than just your credit score. They’ll probably also look at the proof of your current income and whether or not you’ve lived at your current address for at least two years. You’ll also need to have full coverage car insurance. In terms of credit, Experian Automotive shows that the credit score needed to lease a car is often slightly lower than that needed for an auto loan, sitting at about 620. For newer car models, expect to need a credit score of around 680-750.

Which is Better?

Buy or Lease a Car | Cheese Debit Card

The answer to this question really comes down to your cash flow, how much you drive, and how long you plan to keep the car. Here are a few pros and cons of each to help you narrow down the decision.

When Should You Lease a Car?

When you’re figuring out how much the cost of a car is going to be on a lease, you need to think about two things:

  • The value of the car that you and the dealer agree on. This is called the “capitalized cost” and it will be less than the Manufacturer’s Suggested Retail Price.
  • The residual value, which is the estimated cost of the car at the end of the leasing period.


These two factors will help determine how much you’re going to pay each month on the lease. However, you’ll also want to ask yourself the following questions:

  • How much do you drive per month? In most leases, you’re only able to drive 10-15,000 miles per year.
  • How hard are you on the car? Again, in most leases, you have to take really good care of the car to be able to return it at the end of the leasing period.
  • How long do you want the car? If you like switching and upgrading cars a lot, then go for a lease!


Leases, in general, are great for people who love to frequently upgrade to the newest model of their favorite car. They’re also great for people who don’t drive a lot and take good care of their cars.

When Should You Buy a Car?

Among the benefits of buying (i.e. financing) a car is that fact that :

  • You own the car
  • You can sell the car or trade it in when you’re done paying it off
  • You can drive as much as you want
  • You save money in the long-term


Yes, it’s true that financing a car is cheaper than leasing one. While the monthly payments for leasing a car are often cheaper, you are building up equity when you pay off a car through financing. If you’re interested in protecting your investment and building equity over time, then look into buying instead of leasing.


This is also a great option for people who drive more than 10-15,000 miles a year and for those who want to be able to make changes to their car as they see fit.

Saving for the Car of Your Dreams

Whether you’re choosing to buy or lease a car you’re going to need to save some cash to finance the payments.


At Cheese, we’re in the game of ensuring you get more out of your hard-earned money. It’s why we offer $0 in annual fees, $0 in overdraft fees, $0 in international wire fees, and free access to 55,000 ATMs worldwide. 


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And, we also believe that just for banking with us, you should get a bigger slice of the cheese. That’s why we offer great APYs up to 3% and options to earn more for your money from our savings bonus and cashback features. All of these can help you begin to save for the car of your dreams.


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