Should You Lease or Buy a Car? A Cost Comparison

Lease payments are usually lower than loan payments, which can make leasing look cheaper. But a buyer ends up owning a car worth something, while a lessee hands it back. A fair comparison counts that remaining value.

A worked example over three years

Take a hypothetical $36,000 car. The lease costs $449 a month with $3,000 due at signing and a $395 fee when you return it. Buying means $3,000 down and a five-year loan at 6.9% ($651.88 a month). Assume the car loses 15% of its value each year.

After 3 years	Leasing	Buying
Paid out	$19,559	$26,468
Car worth	—	$22,108
Loan still owed	—	$14,575
Net cost	$19,559	$18,934

Buying pays out more cash, but leaves about $7,500 of value in the car. Net, buying comes out $625 cheaper.

Run your own offer through the lease vs buy calculator.

Keep the car longer and buying pulls ahead

Over six years, compare leasing twice with buying once and keeping the car. After the loan is paid off in year five, the buyer owns a car worth about $13,600 outright. Buying comes out about $10,600 cheaper than leasing twice.

When leasing can win

• Fast-depreciating cars. If the same car lost 22% a year instead of 15%, leasing would be about $4,400 cheaper over three years, because the buyer absorbs the lost value.
• You want a new car every few years. Leasing avoids the hassle of selling.
• Strong manufacturer lease deals. Subsidized leases can beat buying on cost.

Watch the lease terms

Mileage caps, wear-and-tear charges and early-termination fees can add thousands. Leases often require more insurance, too. Compare the total cost, not just the monthly payment.

Source: CFPB: Auto loans.