Leasing looks cheaper on the surface — the monthly payment is always lower. But the monthly payment is the wrong number to compare. What actually matters is how much you spend over time, and what you have to show for it. This guide runs the real numbers on both sides.
The monthly payment comparison
Using a $45,000 car (e.g. a mid-size SUV), 6% APR/equivalent money factor, 36-month comparison:
| Scenario | Down payment | Monthly payment | Total over 36 mo |
|---|---|---|---|
| Lease (36 mo) | $0 | $520 | $18,720 |
| Buy — 36 mo loan | $0 | $1,369 | $49,284 |
| Buy — 60 mo loan | $0 | $869 | $52,140 |
| Buy — $9K down, 60 mo | $9,000 | $669 | $49,140 |
Lease wins on monthly payment — not even close. But that comparison only covers 3 years. The real question is what happens after.
The 10-year total cost comparison
This is where buying pulls ahead decisively. After year 5 on a purchase loan, you own the car outright and your payment drops to $0. A lease never ends — you're always making payments.
| Scenario | Year 1–5 | Year 6–10 | 10-year total | Asset at year 10 |
|---|---|---|---|---|
| Lease (3 × 36-mo leases) | $56,160 | $56,160 | $112,320 | $0 |
| Buy (60-mo loan, $9K down) | $49,140 | $0 | $49,140 | ~$8,000 |
When leasing actually makes sense
Despite the long-term math, leasing is genuinely the right choice for certain people:
You drive under 12,000 miles per year
Leases come with mileage limits — typically 10,000–15,000 miles per year. Excess mileage costs $0.15–$0.30 per mile at turn-in. If you drive more than the limit, leasing gets expensive fast. If you drive less, you're paying for depreciation you're not causing.
You use the car for business
Lease payments on business vehicles are often tax-deductible as an operating expense. Buying requires depreciation schedules that are less straightforward. Talk to your accountant — for high-income self-employed individuals, this benefit can be substantial.
You want a new car every 2–3 years
If you're the type who trades in every 2–3 years anyway, leasing removes the hassle of selling and protects you from negative equity. You're already paying for depreciation when you sell early — a lease just makes that explicit.
You need the lowest possible monthly payment
If cash flow is tight and you need reliable transportation with a low monthly commitment, leasing a practical car (not a luxury vehicle) can make sense. The math is worse long-term, but liquidity matters.
When buying is clearly better
- You drive more than 15,000 miles per year
- You want to keep the car for 6+ years
- You modify cars (leases prohibit most modifications)
- You have unpredictable income (missed lease payment = repossession with heavy fees)
- You want to build net worth — the car eventually becomes an owned asset
The hidden costs of leasing
Lease contracts have fees that buyers don't face:
- Acquisition fee — $595–$895 rolled into the cap cost at lease start
- Disposition fee — $300–$500 charged when you return the car
- Excess mileage — $0.15–$0.30 per mile over the limit
- Wear and tear — scratches, dings, or interior damage beyond “normal” use
- Early termination — breaking a lease early is extremely expensive, often costing several months of remaining payments
How to negotiate a lease like a pro
Most people negotiate lease payments. That's wrong. Negotiate the selling price (cap cost)— the same way you'd negotiate a purchase. The monthly payment will follow automatically.
- Research the money factor before going in — ask the dealer directly, or check forums like LeaseHackr for your specific car
- Know the residual percentage — higher residual = lower payment, and some models lease far better than others
- Negotiate the cap cost down from MSRP — 5–8% off is realistic on most models
- Compare the money factor to the current buy rate — some dealers mark up the MF and pocket the difference
- Use our lease calculator to run numbers before you walk in
The bottom line
Buying wins on total cost — almost every time, for almost every buyer. Leasing wins on monthly payment and flexibility. If you're maximizing long-term wealth, buy and keep the car for 8–10 years. If you drive lightly, use the car for business, or genuinely value always driving a new vehicle, leasing can make sense — as long as you go in with eyes open on the true cost.