Transportation

Should I lease or buy a car?

Compare the true costs of leasing vs buying a car over 3, 5, and 10 years including payments, maintenance, and depreciation.

By ShouldICalc Team

Updated January 2025 · See our methodology

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Trade-offs to Consider

Every decision has pros and cons. Here's what to weigh:

Money

Buying costs more upfront but you own an asset. Leasing has lower monthly payments but you own nothing at the end.
Time

Leasing means always driving newer cars with warranty coverage. Buying older means more maintenance time.
Quality

Leasing ensures a new car every 3 years. Buying lets you customize and keep a car you love.
Convenience

Leasing handles depreciation and disposal. Buying means dealing with selling when you're ready to move on.

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Frequently Asked Questions

Is leasing throwing money away?

Not exactly. You're paying for depreciation plus interest—the portion of the car's value you use. It's similar to renting an apartment: you don't build equity, but you get reliable transportation without long-term commitment.

When does buying make more sense?

Buying wins if you keep cars 7+ years, drive more than 12,000 miles/year, want to modify your car, or prefer not having payments eventually. The longer you keep a bought car, the better it compares to leasing.

What are typical lease restrictions?

Most leases limit you to 10,000-15,000 miles/year (excess miles cost $0.15-0.30/mile). You must maintain the car to specific standards. Wear and tear is expected, but damage isn't. Early termination is expensive.

Can I negotiate a lease?

Yes—negotiate the capitalized cost (vehicle price), money factor (interest rate), and residual value (what the car is worth at lease end). Most people don't negotiate leases and overpay. Treat it like a purchase negotiation.

Lease vs Buy: The Complete Financial Comparison

The lease vs buy decision is one of the biggest financial choices drivers make. Let’s break down the math and see which makes sense for your situation.

Understanding the Basic Economics

When You Lease:

You pay for the car’s depreciation during your lease term
Plus interest (called “money factor”)
Plus taxes and fees
At the end, you return the car with nothing to show for it

When You Buy:

You pay the full purchase price (or finance it)
You own a depreciating asset
After payments end, you have free transportation
Eventually, you sell or trade the car

The Real Math: A Side-by-Side Comparison

Example Vehicle: $35,000 car

Lease (36 months):

Down payment: $3,000
Monthly payment: $400 × 36 = $14,400
Total paid: $17,400
Asset at end: $0

Buy (60-month loan at 6%):

Down payment: $3,000
Monthly payment: $619 × 60 = $37,140
Total paid: $40,140
Asset at end: ~$12,000 (35% of original value)
Net cost: $40,140 - $12,000 = $28,140

On the surface: Lease costs $17,400 vs $28,140 for buying.

But wait…

The Long-Term View Changes Everything

Over 6 years:

Leasing (2 consecutive leases):

First lease: $17,400
Second lease: $17,400 (assuming same car)
Total: $34,800
Asset: $0

Buying (keep 6 years):

Loan payments: $40,140
Last year: $0 payments
Total: $40,140
Asset: ~$9,000
Net cost: $31,140

Over 10 years:

Leasing (3+ leases):

~$58,000+ total
Asset: $0

Buying (keep 10 years):

Loan: $40,140
No payments years 6-10
Extra maintenance: ~$3,000
Total: $43,140
Asset: ~$4,000
Net cost: $39,140

The longer you keep a bought car, the more buying wins.

Hidden Costs of Each Option

Lease Hidden Costs:

Acquisition fee: $500-1,000
Disposition fee: $300-500
Excess mileage: $0.15-0.30/mile over limit
Wear and tear charges: $500-2,000 typical
Gap insurance (sometimes required)
Higher insurance requirements

Buying Hidden Costs:

Higher maintenance after warranty (years 4+)
Major repairs possible
Registration and taxes
Depreciation risk (some cars lose more value)
Selling/trading hassle

Who Should Lease

Leasing makes sense if you:

Always want a new car: You like the latest features, safety tech, and reliability
Drive under 12,000 miles/year: Low mileage makes leasing economical
Value warranty protection: Never want to pay for repairs
Don’t want long-term commitment: Lifestyle or job may change
Business use: Leases can be tax-advantaged for businesses
Prefer lower monthly payments: Cash flow matters more than total cost

Who Should Buy

Buying makes sense if you:

Keep cars 7+ years: The longer you own, the better buying looks
Drive a lot: High mileage makes lease penalties expensive
Want to customize: Leases restrict modifications
Hate car payments: Eventually you’ll be payment-free
Are financially disciplined: You’ll maintain the car properly
Value ownership: You like owning things outright

The “Buy and Hold” Strategy

The most economical approach:

Buy a reliable, 2-3 year old used car
Pay it off in 4-5 years
Keep driving it for 10+ years total
Maintain it properly throughout
Drive it until repair costs exceed value

This beats both leasing and buying new because:

Someone else absorbed the steepest depreciation
You own the car outright for 5+ years
Total lifetime cost is lowest

The Monthly Payment Trap

Many people choose leasing because payments are lower. But this ignores total cost:

$35,000 car comparison:

Metric	Lease	Buy
Monthly payment	$400	$619
Total payments (5yr)	$14,400	$37,140
Asset value at 5yr	$0	$12,000
Net cost	$14,400	$25,140

But over 10 years:

Metric	Leasing	Buying
Total payments	$48,000	$37,140
Asset value	$0	$4,000
Net cost	$48,000	$33,140

Lower monthly payments often mean higher lifetime costs.

Smart Strategies for Each Option

If You Lease:

Negotiate the cap cost just like buying
Understand the money factor (multiply by 2,400 for APR equivalent)
Stay under mileage limits religiously
Keep the car in excellent condition
Consider lease takeovers for shorter terms
Never put too much down (risk of loss if totaled)

If You Buy:

Consider certified pre-owned (CPO) for value
Get pre-approved financing before visiting dealers
Plan to keep the car 7+ years
Budget for maintenance after warranty expires
Don’t over-finance (5 years max ideally)
Invest the payment difference once paid off

The Hybrid Approach

Some people do well with:

Lease for 2-3 years to try a model
Buy out the lease if you love it
Keep the bought-out car for 7+ more years

This gives you flexibility early and ownership benefits long-term.

Making Your Decision

Choose leasing if:

You value new cars every 3 years
Monthly cash flow matters most
You drive under 12k miles/year
You don’t want maintenance surprises
Your situation may change soon

Choose buying if:

You keep cars 7+ years
You want to be payment-free eventually
You drive more than average
You prefer ownership
You’re financially disciplined

There’s no universally “right” answer—it depends on your driving patterns, financial priorities, and personal preferences.