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What's the difference between a lease and a car loan?
I'm shopping for cars, and salespeople keep telling me I can either get a lease or a loan. What's the difference between leasing a vehicle and buying one with a loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you opt for a lease, you won’t actually own the vehicle. Instead, you make a down payment and then pay monthly over the course of a predetermined length of time. In most cases, the average term for a lease is three to four years (but it can be shorter or longer).
If you opt to get a car loan, you will borrow money from a lender to purchase a vehicle and then repay the amount borrowed plus interest. The length of the loan is up to you, but most range from 24 months to 60 months (although they can be shorter or longer, too).
While you still owe money on the vehicle, the lender holds a
lien against your car
, which gives them the legal right to take back and sell the car (aka repossess it) if you fail to pay your loan. However, you are the owner of the vehicle, unlike with a lease.In both cases, you’re required to carry
full coverage car insurance
as part of the stipulations of your lease or loan. To find the best rates and save the most money on car insurance, get Jerry
.Jerry is an insurance comparison app that shops for low prices with over 50 different insurance companies for free. You will get quotes in seconds, can make changes at any time, and if you ever have any questions, agents are just a text away!
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