Updated June 17, 2026
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Enter your price, down payment, trade-in, tax rate, and loan term to see your exact monthly payment before you visit the lot.
With an auto loan you pay to own the vehicle; at the end of the loan term it is yours. With a lease you pay for the right to use the car for a set period (usually 2-3 years), then return it. Lease payments are typically lower, but you build no equity and face mileage limits.
Side-by-side comparison
| Factor | Auto Loan | Lease |
|---|---|---|
| Ownership | Yes, at loan end | No |
| Monthly payment | Higher (paying full cost) | Lower (paying depreciation only) |
| Mileage limit | None | Typically 10,000-15,000/yr |
| Customization | Unlimited | Restricted |
| End of term | Own the car free and clear | Return or buy out |
| Wear charges | None | Yes, excess wear fees |
Is it better to finance or lease?
Finance if you drive more than the lease mileage limit, plan to keep the car long-term, or want to build equity. Lease if you prefer lower payments, want a new car every few years, and drive predictable, moderate miles. Over the long run, buying and holding a car typically costs less than perpetually leasing.
What is the $3,000 rule for cars?
The $3,000 rule is a rough guide: if a repair on an older car would cost more than roughly $3,000 and the car's value is not much higher than that repair, it may be more economical to replace the vehicle. It is a practical heuristic, not a hard financial rule.
What is the 1.5 rule when leasing?
A common lease evaluation rule: the monthly payment should be no more than 1% of the vehicle's selling price for a good deal (some use 1.5% as the acceptable ceiling). On a $40,000 car, 1% = $400/month; 1.5% = $600/month. Payments above 1.5% of MSRP are generally considered poor value. Compare with the Auto Loan Calculator to see total cost both ways, and read more about how car payments are calculated.
Try the Car Payment Calculator
Enter your price, down payment, trade-in, tax rate, and loan term to see your exact monthly payment before you visit the lot.