Buy or Lease?
Compare the true cost of buying vs leasing a car over time. Factor in depreciation, insurance, maintenance, and see which path costs less.
Buying: You pay the full price (minus down payment) via a loan, plus insurance and maintenance. When you sell, you get the residual value back. Total cost = payments + insurance + maintenance − resale value.
Leasing: You pay a monthly lease fee plus insurance. At the end of each term, you return the car and start a new lease. No maintenance cost (typically covered by warranty), but you never build equity.
The key variable is how long you keep the car. Buying almost always wins over longer periods because once the loan is paid off, your only costs are insurance and maintenance. Leasing costs the same every month forever.
Buy vs Lease: The Full Picture
The buy vs lease question isn't as simple as comparing monthly payments. A lease payment is almost always lower than a loan payment — but that doesn't mean leasing is cheaper. The real comparison requires looking at total cost of ownership over the full period you plan to have a car.
When Buying Wins
Buying almost always wins if you plan to keep the car for more than 4–5 years. Once your loan is paid off, you have a car with no monthly payment — just insurance and maintenance. Meanwhile, a leasee is still paying $400–600/month forever.
Buying also wins if you drive a lot. Leases typically cap mileage at 10,000–15,000 miles per year, with overage fees of $0.15–0.25 per mile. If you commute long distances or road trip regularly, those penalties add up fast.
When Leasing Wins
Leasing can make sense if you want a new car every 2–3 years, don't drive more than 12,000 miles per year, and value having the latest safety and tech features. It also makes sense if the car is for business use and you can deduct the lease payments.
Leasing also protects you from depreciation risk. Some cars (especially luxury brands) lose value faster than others. With a lease, that's the dealer's problem, not yours.
Hidden Costs Most People Miss
Insurance: Leased cars typically require higher coverage limits (often full comprehensive and collision with lower deductibles), which costs more per month than the minimum coverage you might carry on an owned vehicle.
Gap insurance: If a leased car is totaled, you owe the remaining lease payments even if insurance only covers the car's current value. Gap insurance covers the difference and is often required.
Wear and tear fees: When you return a leased car, the dealer inspects it for damage beyond "normal wear." Dents, stains, tire wear, and interior damage can trigger fees of $500–2,000+.
Disposition fees: Most leases charge $300–500 when you return the car, regardless of condition.
What This Calculator Assumes
This tool compares net cost over a fixed period. For buying, it subtracts the estimated resale value from total costs. For leasing, it assumes you start a new lease each time the term expires. It doesn't account for mileage penalties, wear-and-tear fees, disposition fees, or the opportunity cost of tying up cash in a down payment.
Frequently Asked Questions
Should I put money down on a lease?
Generally no. A down payment on a lease doesn't build equity — it just prepays rent. If the car is totaled early in the lease, you lose that money. It's usually better to negotiate a lower monthly payment or put $0 down.
What about buying a used car instead?
Buying used is often the most cost-effective option because someone else absorbed the steepest depreciation (cars lose 20–30% of their value in the first 2 years). A 2–3 year old certified pre-owned car gives you most of the new-car reliability at a significant discount.
What depreciation rate should I use?
The average new car loses about 15–20% of its value per year in the first few years, slowing after that. Trucks and SUVs tend to hold value better (10–15%). Luxury cars often depreciate faster (20–25%). Check KBB or Edmunds for specific model depreciation data.
Is leasing always a bad deal?
Not always. If you genuinely want a new car every 3 years, leasing is the cheapest way to do it. The mistake is comparing lease payments to loan payments and thinking leasing is "cheaper" — it's only cheaper if you'd otherwise buy and sell every 3 years, which is the most expensive way to own a car.