Lease vs Buy a Car: Total Cost of Ownership
**Leasing** rents depreciation for a fixed term with mileage caps. **Buying** (cash or loan) owns depreciation but can sell or keep the car after the loan ends. Leasing favors **new car every 2–3 years**; buying favors **longer ownership** and no mileage penalties.
Step by step
1. Align with miles driven
Leases punish excess miles ($0.15–$0.30/mile common). High-mileage drivers often favor buying.
2. Compare 36-month all-in cost
Lease: payments + down + fees. Buy: payments + insurance + maintenance + residual value when you sell.
3. Check gap and wear charges
Lease end charges for damage and tires can surprise—buying avoids disposition fees if you keep the car.
Lease vs buy
Buying used and keeping 7+ years usually minimizes cost per mile; leasing optimizes predictable new-car payments.
- Lease: Lower payment for same car class; no equity; mileage caps.
- Buy (loan): Equity after loan; sell anytime; full depreciation exposure.
- Buy (cash): Lowest financing cost if invested capital return > loan rate.
- Business use: Tax treatment differs—confirm with a tax pro for your jurisdiction.
Use our calculators
Common mistakes
- Underestimating mileage
- Ignoring lease disposition fees vs resale value when buying
FAQ
Is leasing throwing money away?
You pay for use like rent—it can be rational if you value new cars and predictable payments.
What is money factor?
Lease finance charge analog—multiply by ~2400 for a rough APR comparison.