Lease vs Buy a Car: Comparing the Payments Tells You Nothing
A lease payment is genuinely lower, and that fact tells you almost nothing. Over three years leasing costs $18,320 against $20,588 to buy - leasing wins. Stretch it to eight years and it is $43,520 against $33,770, and buying wins by nearly $10,000. The payment never changed. What changed is how long you kept it.
The comparison everybody makes, and why it fails
Lease payment: $420 a month. Loan payment: $537 a month.
Leasing wins, obviously.
Except those two payments are buying completely different things. The lease pays for the slice of the car you wear out over three years. The loan pays for the whole car, which you then own.
Comparing them directly is like comparing a hotel bill to a mortgage payment and concluding the hotel is cheaper.
The comparison that works
Count what you are holding at the end.
A $35,000 car. Lease at $420 a month with $2,500 down and $700 of fees. Or buy with $3,500 down on a 7% loan over five years, with the car losing 18% a year. From the lease vs buy calculator:
| You keep it | Leasing costs | Buying really costs | Cheaper |
|---|---|---|---|
| 3 years | $18,320 | $20,588 | Leasing by $2,268 |
| 5 years | $28,400 | $27,948 | Buying by $452 |
| 8 years | $43,520 | $33,770 | Buying by $9,750 |
“Buying really costs” means everything paid out, minus what the car is worth when you finish, minus anything still owed.
The answer flips somewhere around five years. Before that leasing wins. After it, buying pulls away and keeps pulling away.
Why the gap opens up
Three years in, the buyer has spent more and holds a car worth $19,298 - but still owes $13,931 on it. Their real position is not as strong as it looks, which is why leasing wins at that point.
Eight years in, the loan finished three years ago. They have had no payment at all for three years, and they are still driving something worth $7,154.
The leaser, meanwhile, has been through nearly three leases and owns nothing.
That is the whole shape of it. Leasing is priced fairly for short spells. Its weakness is that it never ends.
What leasing genuinely buys you
It is worth being fair about this, because the arithmetic above is not the whole story.
A lease means a newer car, under warranty, with predictable costs and no worry about what it will be worth later. Someone who wants a new car every three years anyway is not choosing between leasing and keeping a car for eight years - they are choosing between leasing and buying-then-selling every three years. On that comparison, leasing often wins.
The mistake is leasing while believing you would otherwise keep a car for a decade. Those are different people making different decisions.
The traps worth knowing before signing
Mileage limits. Every mile over is charged, and the bill arrives at the end when you have no car and no leverage. If you drive a lot, work out the excess charge before signing - it can wipe out the entire saving.
Wear and tear. Assessed when you hand it back, against standards you did not set. Budget something for it.
The up-front payment. If the car is written off early, that money is usually gone. It buys a lower monthly figure and adds a risk most people never consider.
The price is negotiable. A lease is built from the car’s price, the value it is expected to hold, and an interest rate under a different name. The price part is negotiable exactly as it is when buying. Agree the price first, then let the lease be worked out from it.
What actually decides it for you
- How long would you genuinely keep this car? Not what you would like to think - what you have actually done before. Under about five years, leasing is competitive. Past it, buying wins and keeps winning.
- How many miles do you drive? High mileage makes leases expensive and buying more sensible.
- Do you want a new car every few years regardless? If so, compare leasing against buying-and-selling, not against buying-and-keeping.
- Can you handle a repair bill? Owning an older car means occasional bills. Cheaper overall, less predictable month to month.
Put your own figures into the lease vs buy calculator - it counts what you hold at the end, and shows how the answer changes with the years you keep it.
Common questions about lease vs buy
Why is a lease payment so much lower?
Because you are only paying for the part of the car you use up, not the whole car. A lease covers the value it loses while you have it, plus interest. Buying covers the entire vehicle. The monthly figure is genuinely lower - what it does not leave you with is a car.
What is the fair way to compare them?
Count what you own at the end. Buying costs more month to month, but afterwards you hold something worth money. Take that value off what you paid and you get the real cost of buying. On a $35,000 car kept eight years, that is $33,770 against $43,520 to lease.
When does leasing genuinely win?
Short spells. Over three years, leasing this car costs $18,320 against a real cost of $20,588 to buy - leasing is $2,268 cheaper. If you want a new car every few years anyway and stay inside the mileage limit, leasing is doing exactly what it is designed for.
When does buying win?
The longer you keep it, the harder buying wins. At five years the two are nearly level - $27,948 to buy against $28,400 to lease. By eight years buying is ahead by $9,750, because the loan has finished and you are still driving a car worth $7,154.
What should I watch out for in a lease?
Mileage limits with a charge for every mile over, wear and tear charges you cannot predict, and a large payment up front you lose entirely if the car is written off early. Also that the price is negotiable - a lease is built from the car's price, so agree that first.