The primary differences in leasing versus buying a vehicle are the ownership, monthly payment amounts and restrictions on use of the vehicle, explains Consumer Reports. Depending on the lease terms for return of the vehicle at the end of the contract, the length of time a person has the car differs.
Common restrictions when leasing a vehicle include mileage limitations, liability for excessive wear and tear and prohibition of any upgrades or customizations, notes Consumer Reports. The majority of lease contracts allow a certain number of miles driven each year, and any miles over the limit usually incur a fee.
The initial and monthly costs of leasing are usually less than when purchasing the vehicle, according to Cathy Pareto for Investopedia. A low or no down payment is usually required, and sales tax is not paid upfront as it is when purchasing a vehicle. Usually, the monthly payments for a lease are lower, though the cost of insurance is likely higher, since leased vehicles require more comprehensive insurance coverage.
Lease contracts typically last for 36 to 48 months, states Pareto. Leases are either closed-end or open-end. In the former type, at the end of the lease, the car is returned. In open-end leases, the lessee is obligated to purchase the vehicle for a predetermined price.