To make sure you are comfortable paying for your vehicle, it's essential to understand which scenario—leasing or purchasing—is right for you.

Leasing a Vehicle

When you lease a vehicle, you don't pay for 100 percent of the vehicle; you just pay for the portion of the vehicle's value that's used over the term of the lease plus rent charge, taxes and fees. Unlike purchasing a vehicle, you never own the vehicle when leasing.

Pros of Leasing

• Generally, your base monthly payments are lower than if you purchased the vehicle
• You have the option of purchasing the vehicle at the end of the lease
• There are no trade-in hassles at the end of the lease
• You may be eligible for special deals or discounts

Cons of Leasing

• There are mileage limits, typically 10,000 to 15,000 miles per year. If you exceed the limit, you may pay an additional charge for each mile you go over the limit
• You may be charged excess wear and use charges
• Since you don't own the vehicle, you don't build equity
• You may be charged an acquisition fee
• You may be charged a disposition fee
• If your driving needs change, it can be expensive to terminate a lease early

Financing

When you finance a vehicle purchase, you obtain a loan and agree to pay the amount you borrow, plus an agreed-upon finance charge, over a period of a time.

Pros of Financing

• You will eventually own the vehicle
• There are no mileage limits
• Submitting your payments on time may help you establish a good credit history
• Financing helps you purchase a vehicle

Cons of Financing

• Depending on the term, finance payments are generally higher than lease payments
• Resale value of the vehicle can be significantly lower than the purchase price at the end of your term