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Why leasing a car isn't the money trap you think — plus 5 times it beats buying

Anna Serio-AliAugust 12, 2025 at 10:19 PM

Why leasing a car might not be the money trap you think (Luis Alvarez via Getty Images)

To some, there’s something that feels wrong about paying into a car for years without ever owning it — and those never-ending payments don’t help either. Maybe that’s why only 25% of Americans chose to lease when getting a new car in early 2025, according to Experian.

But is leasing always a bad idea? It depends on your finances, how much you drive and how you use your car. In some cases, leasing actually beats buying for your wallet.

5 times when leasing beats buying

While leasing can feel like throwing money away, it’s actually better for your bank account than buying in a few key situations. It all depends on how you plan to drive your car.

1. Your budget’s a little tight

If rent, utilities and other essentials don’t leave much wiggle room in your budget, leasing can put less pressure on your wallet than a car loan. Experian reports the average monthly lease payment at $595 in early 2025. Car loans, on the other hand, set Americans back $745 each month. In other words, leasing could put an extra $150 a month in your pocket each year —that’s $1,800 a year.

Even if you have room for a car payment, leasing gives more breathing room for other big-ticket purchases, like a house. Lower monthly bills help you qualify for better mortgage rates, and so a lease just might save you on your car and your home.

2. You can’t front 20%

Leasing is already less expensive than buying a car in the short term, but if you can’t make a 20% loan down payment, buying becomes even more expensive:

If you find a lender willing to finance without a down payment, you’ll likely face higher rates with more limited options, potentially forcing you to settle for less-than-ideal terms.

Able to put down less than 20%? You’re unlikely to qualify for the lowest interest rates — even if everything else on your application is perfect.

Financing a larger part of your car’s value will either increase your monthly costs or keep you in debt longer than planned. Plus, longer loans increase the risk of going “upside down” — owing more than your car is worth.

3. You love that new car smell

Often get bored with your wheels? If you’re the kind of driver who likes to switch things up every few years, leasing could be a good fit. You won’t sink as much money into each car you drive, thanks to the lower monthly payments (not to mention that down payment you’re skipping).

There’s a catch, though: Break your lease too early, and you’ll pay a fee that can reach several thousand dollars. Finance a car, on the other hand, and you can trade it in whenever you want.

4. You’re racking up work miles

If you’re buying a car for your small business, leasing comes with another advantage: tax write-offs. Come tax time, the IRS biz car loan deductions to interest payments only — but you can deduct your full lease payment (or, at least, the business part of your lease payments).

Before you sign a lease, there’s one caveat: If you use the car for long business trips — say, you’re a traveling consultant or salesman — you might be better off with the standard mileage rate. When the standard mileage deduction exceeds your annual lease costs, buying could offer bigger tax benefits. Besides, most leases limit you to around 12,000 to 15,000 miles annually anyhow.

5. Maintenance isn’t your thing

When you own your car outright, you cover all maintenance expenses — every oil change, every tire rotation and every repair. But lease a car, and your dealership might take care of routine maintenance and warranty-covered issues. Even without that help, you’ll face fewer issues driving a newer leased car than an older one you’d own after paying off a loan.

🔍 Learn more: Most (and least) expensive states for car insurance in August 2025

Bottom line: There’s no universal answer to leasing vs. buying

Leasing can be a solid choice if you’re not ready to commit or need a company car. But dealerships charge by the mile if you go over monthly limits, so it’s not ideal for long road trips in your future. And since payments never end, it can get more expensive than financing.

Ready to settle down with a forever car (until it gives up, that is), buying could make sense. Think about your budget, driving habits and long-term plans before you make a decision. Whatever you choose, may your payments be low and your tank always full.

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