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### Course: Financial Literacy>Unit 13

Lesson 3: Owning vs leasing

# Buying vs. leasing a car

How does buying a new car compare to leasing one? Created by Sal Khan.

## Want to join the conversation?

• Does anyone know how to calculate the monthly payments? I multiplied 1.0422×15,700 and divided by 36 months and still couldn't get that number.
(1 vote)
• The answer is much more difficult than you were expecting, because the interest is paid not on the principal, but it is calculated monthly on the remaining balance. There is a video called "Finite geometric sequences applied to mortgages" (or something like that) under this same course but under the "Housing" section. In that video, Sal explains how to calculate monthly payments when the interest is calculated on the remaining balance and not on the principal.
• This assumes you're buying new and borrowing the money. What if you buy a car that's a little older with cash?
(1 vote)
• Basically, when you buy an older vehicle and pay the full price with cash, you won't have to worry about the interest rates and other details associated with loans. You just fill out the required paperwork, pay the seller for the vehicle in full, pay any taxes and transaction fees at the tax assessor's office, and expect to receive the title of the vehicle (with your name as new owner) within a certain timeframe.
• Dont you have to pay taxes when you sell the car?
• The seller doesn't pay the taxes, the buyer does.
UNLESS
The seller makes a monetary profit on the sale. In other words, after having used the car, it's value has increased. This RARELY happens.
• imma section 8. But imma work at sum wit good wage
• much will monthly payments be for a 2020 Nissan Altima?
(1 vote)
• You would have to check with your local vehicle dealer for more accurate information on that. Your credit score, among other factors, will affect your monthly payment.
• What about maintenance? I'm not sure how it is in the US but here in NL with most Lease cars maintenance, insurance etc. is included
• This depends on how contracts are customarily written in different places. Companies that lease vehicles and other large things are eager to offload certain expenses on lessors. Either that, or they are eager to add charges for services that may not be rendered to the monthly payments. Either way, that's what business is about: extracting the maximum payment from the customer and extending the minimum of service. It keeps the stockholders happy.
(1 vote)
• did you see how he spelled the word ("give") wrong he spelled glie witch is not a word.
(1 vote)
• is leasing cheaper then buying a car?
(1 vote)
• Yes, if you don't lease for too long or the leased car does not drop in value.
(1 vote)
• what happens if buy the car from a private sale?
(1 vote)
• Well, pretty simple. Most of the time they won't let you take a loan, so it's just the price tag.
(1 vote)
• Does leasing mean an agreement or commitment? The definition is it's my concept. I don't know. Is it right? For example, I want a house 🏠. I need an agreement for a year. It's called a leasing house. If I will buy a house. Surely, it's called buying. Am I right?
(1 vote)
• Let's look at the differences between three different concepts: Renting, Leasing, and Buying

When you rent, the contract you have is for a short time, and it can be easily shortened, even by you, so long as you pay to the end of a minimum time. So I might rent a car for a day or for a week.

When you lease, you usually take something for a longer time. It doesn't ever belong to you, but if you wish to cancel the contract before it's over (say, before the end of a year), you need to pay the owner a heavy penalty to get out of the lease.

When you buy, something becomes yours, to do with as you please.

Now, when you buy a house, because it probably costs more money than you have, you likely borrow a lot of money from a bank to be able to call the house yours. You have to repay the bank, and if you don't, the bank takes the house.