Should You Lease or Buy A Luxury Car?

By: Joe Graham, Vice President, Private Banking Relationship Manager
A new luxury car has caught your eye—and you have cash on hand to buy it. But you want to be smart about your finances too—putting your money into a depreciating asset may not be the wisest move right now. Financing your purchase is always an option, but shopping around from one dealer to another to negotiate the best price, the value of your trade-in and the myriad of financing options can be such a hassle. 

Another option to explore is leasing the car of your dreams to fit your unique cashflow, monthly payment, mileage and down payment considerations. 

There’s no perfect answer to the question of whether you should buy or lease a new car—there are pros and cons to both alternatives. Before you decide, let’s look at some factors that should enter your decision.

Which is Better For You?

If you decide to purchase a new car, the following points highlight the upside. You can:
  • Modify or customize the vehicle with all the features you want.
  • Pay cash and eliminate a monthly expense from your budget or, if you finance, pay off your car loan at your own pace.
  • Drive as many miles as you want and go wherever the road takes you.
  • Own the car for as long as you wish; no worries about wear and tear to the vehicle.
  • Sell the car for cash whenever you decide or trade it in on your next car.
Here are a few of the downsides of buying:
- If you are financing your new vehicle, it typically requires a larger down payment and monthly commitment because you are paying the loan off, not just paying down to the end of lease value. 
- Car depreciates in value when you drive it off the lot.
- Maintenance and repair costs are your responsibility once the warranty expires. 
- Over the long haul, more of your cash could be tied up in your car than what it’s worth. 
- When you decide to get rid of your vehicle, you’ll have to hassle with all the issues associated with selling or trading your car. 

Perhaps—if the expense of driving a new vehicle matters and you plan on keeping the new car less than three years. Here are a few more “pros” to consider:
  • You can get a more expensive car for your money because there’s less expense up front and each month during the term of the lease.
  • Up front charges include the first month’s payment, a refundable security deposit, an acquisition fee, a down payment, taxes, registration, and other fees. During the lease term, you pay only for the car’s depreciation, plus interest charges (called rent charges), taxes, and fees.³
  • You can easily transition to another new car every two or three years, with no trade-in hassles.
  • The vehicle is typically under factory warranty during the lease period, so repair costs are little to nothing.
  • If you own a business or are planning on using the vehicle for business purposes, there could be significant tax advantages.4
The “cons” of leasing are also noteworthy:
  • If you’re in the habit of always leasing a car, you could be making car payments for life. You’ll never own a vehicle, and it could cost you a great deal more money in the long run.
  • If you drive more than the limited number of miles specified in your leasing contract (usually 10,000 or 12,000 miles a year), you’ll have to pay an excess mileage penalty (that can cost you an extra 10 cents to 50 cents per mile).³
  • If you don’t use your mileage allowance, you don’t get reimbursed—this could be a consideration if you’re working from home these days.
  • If the car is not in good condition when you go to turn it in, you’ll be responsible for paying charges for the damage to the vehicle. The car should be in showroom condition, minus usual light wear and tear, with any custom modifications removed at your expense.
  • If you decide to terminate the lease early, it will be expensive—you could be on the hook for thousands of dollars in fees and penalties. 
In addition to buying or leasing, there’s a third alternative to driving a luxury vehicle: car subscription services. For the past few years, carmakers have been launching subscription services in limited metropolitan areas across the country. As with traditional leasing options, you don’t own the vehicle—you use the car for an all-inclusive monthly fee that covers insurance, maintenance, and roadside service.

Perhaps the most popular perk of these subscription services is your ability to “flip” in and out of different luxury cars with short notice, often with concierge delivery to your front door or location of your choice. If you like the flexibility of driving a sedan during the week and switching to a sports car or SUV for a weekend excursion, this option may be quite appealing to you. Other perks include5:
  • Convenience. Set up your subscription online and manage it through your smartphone app.
  • Flexibility. You have the option of changing cars more frequently than if you buy or lease a vehicle.
  • Potential cost savings. With a subscription service, you do not have to make a down payment or pay finance charges.
  • No negotiating. Fees are set.
  • Less time commitment. Some car subscription services allow you to use vehicles for as short as a month.

However, you may not be interested in this alternative if car ownership is important to you. Usually the cars offered are not brand new, but they are less than three years old and in excellent condition. Also, there are some restrictions on car use, with most programs imposing rules on drivers—a number of services use vehicle tracking. If switching out cars holds no appeal or you like the thrill of driving a hard bargain in the traditional buying or leasing processes, subscription plans may not be for you. 

Some automakers offering car subscription services across the country include Porsche, Volvo, Mercedes-Benz, Audi, BMW, and Nissan. Prices range across the board depending on the vehicle model, term of lease, and subscription costs and premiums. Other automakers are expanding into offering these services as well. Check with your local car dealers for more information and details regarding programs available in your area.

It’s important to do your homework and carefully weigh all the pros and cons before deciding which option is best suited for your cash flow needs and lifestyle. Contact Commerce Trust today—we will answer your questions regarding all your options, help you evaluate your cash flow situation, and discuss these and other considerations that may help you with this important decision. 

¹ Source: “70 Interesting Car Buying, Statistics, & Trends,”, ©2021.
² Source: “Car Leasing Guide: An Essential Guide to Leasing Cars,” Car Leasing Guide (, accessed January 15, 2021.
³ Source: “Leasing vs. Buying a New Car: Comparing the Two Major Finance Choices,” Consumer Reports, last updated January 9, 2021.
4 Consult your tax advisor
5 Source: “What Are Car Subscription Services?” Edmunds,, January 8, 2019.

The opinions and other information in the commentary are provided as of February 2, 2021. This summary is intended to provide general information only, and may be of value to the reader and audience. 

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such. 

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. 

Commerce Trust is a division of Commerce Bank. 

Buy or Lease



joe graham commerce trust
Joe Graham Vice President, Private Banking Relationship Manager Commerce Trust
Joe is a private banking relationship manager for the Commerce Trust. As a member of the private client team and an experienced, tenured private banker, he and his dedicated client support staff are responsible for ensuring each client’s experience with Commerce Trust exceeds expectations.

Joe’s specific responsibilities include management of our clients’ day-to-day banking, cash management, and credit needs, while also helping them navigate the wide array of our financial services to find the solutions that best fit their needs. Currently, Joe is partnering with the bank’s healthcare banking team to provide private banking services to their medical professionals. Joe has more than 20 years experience in banking.

He graduated from Park University with his bachelor of science degree in finance and marketing. He serves as president of the Executive Council for Martin Luther Academy. When not serving his clients, Joe spends as much free time as possible with family. He enjoys reading, hiking the Northland trails, and photography. Joe and his wife, Becki, have one daughter.