Lease or Finance a Toyota: Which Fits How You Drive

Financing and leasing a Toyota differ in what your payment goes toward and in what happens when the term ends.

Financing a Toyota means taking out a loan to buy it, then paying the loan back monthly over a set term, usually with interest. Each payment lowers what you owe. Your equity is the difference between what the vehicle is worth and the balance left on your loan. It can be positive or negative, and it comes into play when you trade the vehicle in. When the loan is paid off, the payment ends and the Toyota is yours outright, to keep, sell or trade.

Leasing a Toyota means paying to use it for a set term instead of buying it. Your payment is based mainly on the difference between the vehicle's price and what the leasing company expects it to be worth at the end of the lease (its residual value), plus a finance charge. The lease contract sets a yearly mileage allowance, and miles beyond it are usually charged when you turn the vehicle in. A lease does not build ownership the way a loan does, so at the end you hand the vehicle back unless you buy it.

The table below compares financing and leasing a Toyota on the points that shape the choice.

Financing and leasing each suit a different kind of Toyota driver, and each has a downside.

A financed Toyota is yours, so there is no mileage allowance to watch, no matter how far you drive. Keep it past the last payment, and you drive on with no loan payment. The downside is that you are paying off the whole vehicle, usually with interest. If a lower monthly payment matters more to you than owning the vehicle, look at a lease. We finance new and used vehicles, so you can start with our new Toyotas or our used vehicles.

A lease runs for a set term, and at the end you can return the vehicle and move into another one, which suits a driver who wants a newer Toyota every few years. The downside is living within the yearly mileage allowance and keeping the vehicle in good shape for the condition check when you turn it in. If you want a Toyota that is yours outright once it is paid off, financing is the better match. We lease new Toyotas, so start with our new Toyota inventory.

To see how your own driving tips the choice, count all the miles you drive in a year, not just your commute. The typical commute in our region runs about 26 minutes, but errands and weekend trips add miles too, including drives into the Laurel Highlands to hike or raft at Ohiopyle State Park. Then compare your own yearly total with the mileage allowance in any lease you are weighing. If your total runs past the allowance, even after asking for a higher one, financing leaves the miles up to you.

Most households in our region own two vehicles. If yours does, weigh each vehicle's yearly miles on its own when you choose how to pay for it.

If you plan to modify a truck or 4x4, financing usually fits better, because a lease generally expects the vehicle back in its original condition. Freeze-thaw cycles and heavy winter road salting put any vehicle here at risk of corrosion. On a lease, the vehicle's condition is checked when you turn it in, so if your driving keeps you on the road through hard winters, weigh that before you lease.

Several things shape the monthly payment on a Toyota lease or loan, and some of them work differently in each.

• The price: Both a lease and a loan start from the vehicle's price. Tax and title are added to our listed prices.
• Your down payment: On a loan, a down payment lowers the amount you finance. On a lease, money paid at the start lowers the monthly payment.
• Your trade-in and what you still owe: On a loan, a trade-in's value lowers the amount you finance. On a lease, trade equity can go toward the money you pay when the lease starts. Either way, the balance left on your current vehicle affects your trade-in.
• The term (loans): On a loan, at the same rate, a longer term lowers the monthly payment and usually raises the total interest you pay.
• Your credit: A lease and a loan both need credit approval, and the rate a lender offers on a loan depends on your credit and other factors. A lease's finance charge is often written as a money factor, a small decimal, instead of an APR (annual percentage rate).
• Your mileage allowance (leases only): You can often ask for a higher yearly mileage allowance, which raises the payment.

These tools help you work out a loan payment, value your trade-in and start a financing application.

• If you're leaning toward financing, our payment calculator estimates a monthly loan payment.
• Request a trade-in appraisal; the form asks for roughly what you still owe on your current vehicle.
• Apply through our finance department, where you can start our online credit application.
• If you have questions about your credit, send a short credit assistance request.
• See our current specials on new Toyotas, each with its own expiration date.

Before you finance a new Toyota, take a look at the Kelly Confidence Program.

Once you are ready to choose the vehicle itself, you can browse our new Toyotas, our used vehicles and our certified pre-owned Toyotas online. We lease new Toyotas and finance new and used vehicles. Our lot leans toward trucks and 4x4s, with hybrids available across the Toyota lineup. When you find one you like, request a test drive.