When you start shopping for a new car, there’s always one important choice to make first: should I buy or lease?

In the past few years, leasing has become an ever more popular option. Now nearly one-third of cars leaving a dealer’s lot are leased. It’s common for all types of cars, from budget subcompact cars to luxury SUV’s.

If you thought that leasing was just for ritzy business types, you can think again! It’s a great option for many people, and can save you many of the risks and costs associated with owning a car.

Both leasing and buying have their benefits and drawbacks to consider. Before you decide, take a look at some of the biggest factors and how they play out on both sides of the table.

1. Cost

Cost is always a big consideration, but when it comes to leasing or financing, it’s not so simple as just comparing list prices.

Whether you lease the car or buy it, you will pay both a down payment and certain other costs due at the time of contract signing, and monthly payments.

When you buy a car, the down payment will typically be 10-20% of the car’s value. You will also have to pay taxes, registration and other fees upfront.

When you lease a car, the cost upfront will include a down payment (unless it’s a zero-down lease), the first month’s payment, a security deposit and acquisition fees, plus taxes, registration, etc. Although the calculations are a bit more elaborate than for buying, the amount due at signing will usually be less than if you choose to buy the vehicle.

Whether you buy or lease, it’s critical to pay attention to all the numbers involved, not only the flashy sticker price.

Winner: Toss-up. It depends a lot on the car and the terms of lease you get approved for.

If you buy, you have a car after paying off your loan, whereas at the end of a lease you don’t have much to show for it. However, in a lease you’re just paying off the car’s residual value rather than its whole price, so you’ll pay more interest and sales tax.

2. Miles

When you lease a car, it comes with a set limit on how many miles you can drive over the lease period. For leases of the standard 24 or 36 months, this is generally 10,000 to 15,000 miles.

Will this be enough for you? To find out, calculate your average miles driven (or how much you expect to drive) per month. From this you can generate a yearly average, taking into account any longer road trips that you anticipate.

Then find out how many miles are allowed on the cars you’re interested in, and see whether it fits the bill.

If you need to drive more than a standard lease contract will allow, you can either apply for a high-mileage lease, resign yourself to paying excess mileage fees at the end of the contract, or just buy the car.

Winner: Buying. You can’t beat no limits.

3. Repair

Every car has problems sooner or later.

For its first few years, a car is still covered by warranty, so if it has any major problems the manufacturer will pay for it. This means that if you lease a car, it will likely be under warranty for the whole time.

With a lease car, you’re responsible just for standard maintenance. This might be more maintenance than you would invest in for a car you own outright, but it will keep the car in optimal running order. Good for the leasing company and for you!

If you don’t demonstrate proper care for the lease vehicle, or if you return it with significant damages that will affect its resale value, you will be responsible for these damages.

You may have heard horror stories about people returning leased cars only to get hit with crazy fines for insignificant damage. I won’t lie, this can happen.

However, if you’re reasonably careful with the car, get everything you can cleaned and fixed up before the inspection, and get the inspection done by an independent company, you should be ok.

With a car you own, of course there’s no restrictions on your car maintenance except the inspections demanded by state law. If you get a few dents or scratches on the car, the only person who cares is you.

This can take a lot of the pressure off. However, after a few years the car you own will no longer be covered by warranty, so you will have to pay for major repair work. Also keep in mind that older cars start to demand more maintenance and have more costly problems. Driving a new car has fewer risks and less maintenance costs.

Winner: Leasing. Avoid dealing with the problems of an older car that’s not under warranty.

4. Models

These days, with leasing becoming such a popular option, you can lease your way behind the wheel of just about any new car, truck or SUV you have your eyes on.

One of the perks of leasing is that you get to drive a brand-new car every two or three years, with none of the hassle of reselling your old vehicle. If you want to enjoy the latest features, advanced tech and peak performance of new cars as they hit the market, or if you just love that new car smell, it’s definitely the way to go!

That said, with a lease car you won’t have so many options to customize or mix-and-match features. So if you’re very picky or you’re choosing a model just for specific features, you might be better off buying.

When you lease a car, also you won’t be allowed to make any alterations, since the vehicle must be returned in sale condition.

What if you want a used car? Many people don’t know this but used car leases actually exist. Few dealerships advertise them but some will offer if you ask, and if you’ve done your research beforehand to find the car you’re interested in.

Winner: Leasing. Unless you love customization or you’re one of those people who loves driving the same car for 10 years.

5. Risk

Leasing or buying a car both come with some degree of risk.

For lessees, the classic problem is: what if I want to end my lease contract early?

If you buy the car, there are a few easy ways to wiggle out of the loan if you can’t make payments or don’t want the car anymore. You can try to modify your loan, trade in the car or sell it.

With leasing isn’t so simple, though there are a few ways out.

That said, leasing avoids the biggest risks associated with owning a car: major repairs and depreciation.

As I mentioned earlier, during a lease period the car will still be covered by warranty. But if you own the car and something serious goes wrong after the warranty is over, it’s all on you.

Then there’s the issue of depreciation, or the car’s loss in market value over time.

Of course, lease cars also depreciate. In fact, this anticipated loss in value (that residual value I mentioned earlier) is the biggest factor that determines your monthly lease payment. But at the end of your lease term, you’re not stuck reselling your car at a loss. You just turn in the keys and walk away.

Winner: Leasing. As long as you can keep up your monthly payments, there’s very little risk involved.

Conclusion

Hopefully this clarifies some of the key points to consider. Neither buying nor leasing is always the best choice for everyone. Which is best depends on your financial status, driving needs and just on your preferences.

Buying is better if…

• You want to keep the same car for a long time
• You want a very specific model with special options, or you like making alterations
• You drive a lot and don’t want to keep track of mileage
• You don’t want to worry about keeping the car in pristine condition for return
• You don’t want to be making monthly payments forever

Leasing is better if…

• You enjoy driving a new car every few years
• You’re financially stable but don’t have a big chunk of cash to pay upfront
• You want lower monthly payments
• You don’t want to worry about major problems that won’t be covered by warranty
• You’re not looking forward to the hassle of reselling your car later
• You don’t want to deal with the high maintenance and repairs for an older car

Are you excited to get behind the wheel of a new car? When you’re looking for a new vehicle, you’ve probably asked yourself a fundamental question: should I lease a car or buy it outright? Depending on your financial situation, credit, lifestyle and driving preferences. either leasing or buying could be better. Check out the pro’s and con’s of each in these 5 areas to find out which is right for you.