Car buying can be a pain. Though financing is the best option for most people, sometimes you need a car but don’t want to buy it. That’s where leasing comes in. You can choose to buy the vehicle after the lease ends (unless it’s a Tesla), or you can move on to something newer.

But will leasing a vehicle build your credit as financing does? The answer isn’t nearly as complicated as you might think. However, is it worth it?

How leasing is different from financing

Finding the car of your dreams is as easy as seeing it drive by on the highway. Choosing how you’re going to pay for said car is the hard part.

On the surface, leasing and financing have a lot in common. You have to apply for both and wait to get approved before you can proceed. This usually involves some negotiation, such as seeking a lower interest rate or persuading a loved one to cosign. Next comes signing a contract, which determines how long you’ll have the vehicle and other terms and conditions.

This is also where the lease-versus-finance question really comes into play. The major difference between leasing and buying is how long you want to keep the vehicle. If you like to drive a vehicle until the wheels fall off, financing is for you.

On the other hand, if you don’t like driving a vehicle that’s more than a couple of years old, leasing is the way to go. But before you decide to lease, you should consider the drawbacks.

Is leasing worth it?

There are some downsides to leasing. Though you can buy the car after you pay off the lease, you end up paying more. Financing it from the start means less money coming out of your wallet.

If you decide not to buy, you can get hit with unexpected payments when the lease is up. If there are any dents or dings on the vehicle, you’ll be responsible for paying for repairs. You’ll also have to find money to cover taxes, maintenance fees, and so on. In other words, the vehicle must have that straight-off-the-lot look when you turn it in. And for most people, that’s impossible.

You also can’t modify the vehicle. Customizing it is a big no-no for a leased vehicle, so think carefully before slapping bumper stickers on the back.

Also, if you have poor credit, leasing might not be the best option. As surprising as it is, you’ll have an easier time securing a car loan than a lease, Experian explains. But this comes at the price of a higher interest rate, of course. 

Does leasing build your credit?

The good news is that leasing a car can build your credit score just like financing. If you have less-than-stellar credit and can’t outright buy the vehicle you want, this could be a way to build your credit while saving money for your dream car.

According to Experian, “As long as your leasing company reports to all three credit bureaus — Experian, Equifax, and TransUnion — and all your payments are made in a timely manner, an auto lease can certainly help to build or establish your credit history.”

Of course, that means you’ll still need to make your payments on time. Missing a payment or making one late will lower your credit score. So use this power wisely, because it can do as much harm as good.