Everyone who is looking to buy a car asks themselves this question, however there is no one right answer. Examining your particular financial situation will allow you to make the right choice between leasing and buying.

When you lease a car, you’re basically borrowing it for an extended period of time and paying for the change in that car’s value from when you first lease to when you return it to the dealership. Let’s say you lease a brand new Honda Accord which sells for $20,000. You lease it for 36 months and when you return it, it is only worth $13,000. Your monthly payments therefore will reflect the depreciation (or the loss of value) of the car and that $7,000 in depreciation will be paid over the course of those 36 months you lease the car. Lease agreements usually come with warranties that allow you to get your car fixed for free, should there be a problem within the warranty period.

On the other hand, if you were to buy the $20,000 Accord outright, you would pay for the entire cost of the vehicle instead of just the depreciated value. The benefits of buying a car are complete ownership of the vehicle, ability to drive as many miles as you would like, ability to customize your vehicle, and lastly, the ability to easily sell or trade your car.

Ultimately, if you are able to afford higher monthly payments, buying a car is probably the best choice for you. But if you want lower monthly payments and new cars every two or three years, leasing a car may be a better option.