Some offers on this page are from advertisers who pay us, which may affect which products we write about, but not our recommendations. See our Advertiser Disclosure . Is it better to lease or finance a car? What drivers should know. P Penny Gusner Ashley Kilroy Contributing Writer Tue, August 4, 2026 at 10:17 AM PDT 11 min read When you're in the market for a vehicle and you're not paying for it in cash, you might be wondering whether it's better to lease or finance a car. Each option has several advantages and disadvantages. Whether you choose to lease or finance a car usually depends on your preferences and financial goals. Here's a roadmap of how leasing and financing compare, along with the car insurance considerations for each. Learn more: How does car insurance work? The basics explained . Lease vs. finance: Your car-buying options The average new car purchase price was $49,200 in May 2026, according to Kelley Blue Book. Meanwhile, the average used car list price was $26,918. If you need a vehicle and you don't have that kind of cash saved, your best options are to lease or finance a car. Learn more: Cheapest car insurance Leasing a car When you lease a car, you're essentially renting it for the long term. You'll sign a lease agreement that specifies how many months the contract will last, the monthly payment, and a mileage limit. If you go over the mileage cap, you'll generally be charged a per-mile fee, which is often between 10 and 25 cents per mile, though some leases charge more. There are a few key details you need to know as the lessee (the person leasing the car), before you sign an agreement: Capitalized cost: Sometimes referred to as the cap cost, this is basically the agreed-upon value of the car, plus the taxes, title, and registration fees, and any add-on protections you purchase. Amount due at signing (DAS): While leasing companies don't typically require a down payment, you'll usually need to pay some upfront costs when you sign the lease. This is typically called the amount due at signing (DAS). Costs can include your first month's payment, taxes, registration fees, and acquisition fees. Lease term: The amount of time your lease will last. The average car lease term is about three years, though shorter and longer leases are available. Residual value: This is the amount the dealership estimates your vehicle will be worth at the end of the lease, accounting for typical car depreciation . It's expressed as a percentage of the car's MSRP. For example, if you sign a three-year lease on a $50,000 car and the residual value is 60%, the dealer estimates that your vehicle will be worth $30,000 at the end of the lease. Usually, this number isn't negotiable. Money factor: This is the financing charge used in a car lease, similar to how an interest rate works on a loan. It's usually expressed as a decimal. To get...
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