Should I buy or lease a car?

Buying costs less over a long horizon because you eventually own the car and the payments stop. Leasing costs less per month and suits drivers who replace their car every few years, drive predictable mileage and value a fixed payment over building equity.

Why is a lease payment lower than a loan payment?

Because you only pay for the depreciation you use plus a finance charge, rather than for the whole vehicle. The car's residual value stays with the leasing company. That is also why leasing never stops costing you: there is no asset at the end.

Does leasing make sense for high-mileage drivers?

Usually not. Leases cap annual mileage, commonly between 10,000 and 15,000 miles, and charge a per-mile penalty beyond it. Someone consistently driving well above the allowance can easily erase the monthly saving in excess mileage charges alone.

What is the total cost of ownership?

It is every cost across the period you hold the car: payments, insurance, fuel, maintenance, repairs, taxes and fees, less whatever you recover when you sell. Comparing total cost of ownership rather than monthly payments is the only fair way to weigh buying against leasing.

How does resale value affect the comparison?

Heavily. When you buy, the resale value is money you get back, so a car that holds value cuts the true cost of ownership substantially. When you lease, that same strong residual lowers the monthly payment instead. Either way, depreciation is the largest single cost of running a car.

Buy vs Lease Calculator

Total Buy Cost

Total Lease Cost

Buying Against Leasing: The Real Comparison

Comparing a car loan payment with a lease payment tells you almost nothing, because the two payments buy different things. A loan payment purchases the entire vehicle over time. A lease payment rents the portion of the vehicle’s value you consume. Set side by side without adjustment, leasing will always look cheaper - and that comparison will always be wrong.

What Each Arrangement Actually Costs

Buying

A down payment up front
Monthly loan payments covering the whole purchase price plus interest
Full responsibility for maintenance once any warranty expires
Minus the resale value you recover when you sell

That final line is the one most comparisons omit, and it is decisive. Buying is expensive during the loan and cheap afterwards, because the payments end while the car keeps working.

Leasing

An initial payment at signing, which is not refundable
Monthly payments covering depreciation plus a finance charge
Mileage limits, with per-mile charges beyond them
Wear-and-tear charges assessed on return
No asset at the end of the term

Depreciation Is the Real Expense

Whether you buy or lease, the largest cost of running a car is the value it loses. Leasing makes that cost explicit: you pay the difference between the price and the residual value, month by month. Buying hides it, because it only materialises when you sell.

This is why a car that holds its value well is cheaper under either arrangement. It lowers the lease payment directly, and it raises the amount a buyer recovers at resale.

Where the Crossover Sits

Over a single three-year term, leasing usually costs less in cash terms. Extend the comparison and the picture inverts. A buyer who keeps the car for eight or ten years spends several of those years making no payments at all, while a serial leaser never stops. The longer the horizon, the more decisively buying wins on cost.

The corollary matters too: if you genuinely intend to change car every three years regardless, buying loses much of its advantage, because you absorb the steepest part of the depreciation curve each time and pay transaction costs repeatedly.

Beyond the Numbers

Mileage. Heavy drivers are poorly served by leases.
Modifications. Leased cars must be returned close to original condition.
Repair risk. Leases usually stay within warranty; owners eventually carry repair costs themselves.
Flexibility. An owner can sell at any time; a lessee is committed to the term.
Cash flow. A lease preserves capital that a down payment would tie up.

Using This Calculator

Enter the purchase side - price, loan term, interest rate, down payment and estimated resale value - and the lease side - term, monthly payment and initial payment. The result compares total buy cost against total lease cost across the period, with the resale value credited back on the buying side. Extending the buying horizon beyond the loan term shows how quickly ownership pulls ahead once the payments stop.

Conclusion

Leasing buys predictability and a newer car; buying buys a lower long-run cost and an asset at the end. Compare total cost across a realistic holding period, credit the resale value where it belongs, and the right answer for your circumstances usually becomes obvious.