When to lease vs. buy a car
Buying tends to win the longer you keep the car, because the payments stop and a lease's never do. Leasing can win over a short stretch, or when your loan rate is high. In this example, leasing is $1,988 cheaper over 3 years, and buying is $46,021 cheaper over 12.
| Years | Car value then | Net cost to buy | Net cost to lease | Cheaper by |
|---|---|---|---|---|
| 3 | $23,717 | $27,678 | $25,690 | Leasing, $1,988 |
| 6 | $15,000 | $46,369 | $54,650 | Buying, $8,282 |
| 9 | $9,487 | $62,556 | $87,296 | Buying, $24,740 |
| 12 | $6,000 | $78,075 | $124,096 | Buying, $46,021 |
The CFPB sums up the basic trade. When you buy, you own the car once your payments are done, and you can drive as much as you like. A lease is more like renting. Your payments are often lower, but they won't go toward owning the car unless you use a purchase option.
How this compares a car lease vs. buying
It adds up everything each path costs over the same months, then counts what you have left. Buying costs $46,369 here: the car loses $22,500 of value, the loan charges $6,909 of interest, tax and fees take $3,238, upkeep is $5,400, and lost returns add $8,322.
| Cost | Buying | Leasing |
|---|---|---|
| Lost value of the car | $22,500 | Inside the payments |
| Loan interest | $6,909 | None |
| Sales tax and fees to buy | $3,238 | None |
| Lease payments | None | $43,704 |
| Cash at signing | Inside the costs above | $800 |
| End-of-lease charges | None | $790 |
| Upkeep and repairs | $5,400 | $3,000 |
| Lost investment return | $8,322 | $6,356 |
| Net cost | $46,369 | $54,650 |
Lost value is the price minus the resale value you enter. You count it whether you sell the car or keep it, because a car you keep is still worth that much. Lost return is what your cash could have earned instead. In this example, buying ties up more money early, so it carries more of this cost. To build this in Excel, list each month's cash for both paths and compound them at your return, which is how the year-by-year table here is made, and you can download that as a CSV.
When does buying a car get cheaper than leasing?
In this example, the crossover is month 45, or Oct 2030 if you started in January 2027. That's the month buying gets ahead and stays ahead through the end of the period, counting selling the car and clearing the loan at that point. Before then, a sale wouldn't recover the tax, fees, and early value you've lost.
We look for the last time buying is behind, not the first time it's ahead. A new lease starts with a signing payment, so the lead can change hands. Also, a leased car can't simply be dropped mid-lease without charges, so the lease line is too kind in those months. Treat each lease end as the cleanest place to compare.
Why the resale value matters so much
Every dollar of resale value moves the answer by a dollar. Both paths cost the same if this car sells for $6,718 after 6 yrs. Above that, buying wins. This calculator doesn't guess a depreciation rate. You enter the number, so check prices for similar cars of that age and mileage, as the CFPB suggests.
| Resale value | Net cost to buy | Net cost to lease | Cheaper by |
|---|---|---|---|
| $5,000 | $56,369 | $54,650 | Leasing, $1,718 |
| $10,000 | $51,369 | $54,650 | Buying, $3,282 |
| $15,000 | $46,369 | $54,650 | Buying, $8,282 |
| $20,000 | $41,369 | $54,650 | Buying, $13,282 |
The chart draws the car's value as a steady percentage decline between today's price and your resale number. A real car may lose value unevenly, so the crossover month is an estimate. The total at the end of the period doesn't depend on that path, only on your final number.
What else changes whether leasing or buying wins
- Miles. A lease caps them, and the CFPB says most limit you to 10,000 to 15,000 a year. Adding $1,500 a year of excess mileage charges raises the lease's net cost from $54,650 to $64,223. Remember to lower your resale value too if you'd drive that much in a car you own.
- Your loan rate. At 4% instead of 7%, buying saves $11,792. At 12%, it's only $2,088.
- What your cash could earn. With no return, buying saves $10,247. At 8%, it saves $5,874. Either way, it's your own estimate, not a promise.
- The next lease's price. This starts by assuming each new lease costs the same. If each one cost 3% a year more, the lease would run $56,885 instead of $54,650.
The trap in comparing a lease with a loan
It's easy to compare the monthly payments and stop there. Here the lease is $120 a month cheaper than the $727 loan payment, yet leasing costs $8,282 more over the period. The FTC notes that lease payments are usually lower than loan payments on the same car, because you pay for its depreciation and not to own it.
A lease can still be the right call. It can suit you if you want a known cost, a newer car, and no resale hassle, and you're willing to pay for that. This comparison also leaves out how you value those things, along with any insurance difference unless you add it to the yearly upkeep inputs. If you'd use the car for business, tax rules can change the answer, so ask a tax professional. To model each side in more detail, use the car lease calculator and the auto loan calculator.
Common questions
Is it better to lease or buy a car?
It depends on how long you keep it. On these example numbers, leasing is $1,988 cheaper over 3 years, and buying is $8,282 cheaper over 6. Enter your own quotes, because the crossover moves with your loan rate, lease payment, and resale value.
Can I compare leasing a new car with buying a used one?
Yes, as long as you know you're comparing two different cars. Enter the used car's price, loan, and resale value on the buy side and the new car's lease quote on the other. A used car may also need more repairs, so raise the yearly upkeep input.
Does this count keeping the car after it's paid off?
Yes. Choose a long comparison period, and the loan stops when it's paid off while lease payments continue. The car's value at the end is counted whether you sell it or keep driving it.
What about the buyout at the end of a lease?
This compares leasing again and again with buying from the start, so it doesn't model a buyout. If you plan to buy your leased car, look at your contract's purchase option price. The auto loan calculator can show the cost of financing it.
Why does the calculator ask for a lease quote instead of a money factor?
A quote is what you'll have in hand, and it keeps both paths simple. If you only have a money factor and residual, the car lease calculator works out the payment and passes it here through its link.
Sources
- What should I know about leasing versus buying a car? · Consumer Financial Protection Bureau
- Financing or leasing a car · Federal Trade Commission
- Take control of your auto loan · Consumer Financial Protection Bureau