Lease vs Select Term vs Traditional Loan — Which Is Right for You in 2026?

One of the most common questions I hear from buyers in DC, Maryland, and Virginia is: "Should I lease, finance, or do a Select Term?" The honest answer is that it depends on your mileage, how long you keep your cars, and what you value most — ownership or a lower payment. Here's how I break it down.

Side-by-Side Comparison

Traditional Loan — When It Makes Sense

A loan is the most straightforward path: you borrow the full price (plus tax and fees), pay it down over your term, and at the end you own the car outright with no mileage restrictions. The trade-off is the highest monthly payment of the three. It's the right call if you drive a lot of miles, keep your cars for years, or simply want the long-term value of full ownership with no strings.

Lease — When It Makes Sense

A lease keeps your payment lowest because you're only paying for the portion of the car you use over 24–39 months, plus a finance charge. You stay in a newer car under warranty and hand it back when you're done. The catch is the mileage limit (typically 10,000–15,000/year, with per-mile charges if you go over) and the fact that you don't build equity — at lease-end you own nothing unless you buy it out. Best for lower-mileage drivers who like upgrading every few years.

Select Term — BMW's Best of Both Worlds

Select Term is BMW's answer to "I want a lower payment but I still want to own it." It's a 60-month balloon structure built on the car's residual value: like a lease, your monthly payment is based on a residualized value, so it lands below a traditional loan — but unlike a lease, there's no mileage cap and you keep full ownership rights. At the end of the 60 months you make a final balloon payment to own it free and clear, or trade it in, and you start building equity after about year three. For BMW buyers who want loan-style ownership at closer to lease-style payments, it's often the sweet spot.

How to Decide

• High mileage or long-term keeper? → Traditional Loan.
• Low mileage, love a new car every few years? → Lease.
• Want ownership but a lower payment, and you're in a BMW? → Select Term.

A Real Worked Example

Say you're looking at a $55,000 BMW X3 in Maryland. Run it through all three structures and the differences become concrete fast: a 60-month loan lands you around the highest monthly payment but zero balloon and full ownership from day one. A 36-month lease on the same car comes in noticeably lower per month, but you're handing the keys back (or paying a separate buyout) at the end with nothing built up. Select Term splits the difference — a payment meaningfully below the loan, no mileage cap, and a scheduled balloon at month 60 that you can pay off, refinance, or roll into a trade. The exact numbers shift with your credit, down payment, and trade equity, which is exactly why we built the calculator to run all three side by side instead of asking you to do the math in your head.

What If You Want Out Early?

This is the part people don't think about until they're already in a contract. With a loan, exiting early just means paying off (or refinancing) the remaining balance — straightforward, and if you have equity, you keep it. With a lease, getting out early is the expensive one: you're generally on the hook for the remaining payments unless you find someone to take over the lease or the dealer offers an early-termination deal. With Select Term, you can trade or sell any time before the balloon is due — if the car's worth more than what you owe (loan balance including the residual), you walk away with equity; if not, you cover the difference, same as any car loan. If there's a real chance your situation changes in the next few years, that flexibility is worth weighing as heavily as the monthly payment.

The smartest move is to run the same car through all three and look at the real numbers side by side — exactly what DMVCalc is built to do.