Lease vs Buy: Which Is Better?

The one comparison that matters

Put a lease quote and a finance quote on the same VIN or the same trim. Then compute five-year cash out the door: lease payments plus due at signing plus a replacement lease, versus down payment plus loan payments plus tax. Ignore “you build equity” slogans until the numbers are on paper.

Dealers sometimes quote a lease on a loaded Limited and a purchase on a base LX. That is two different cars. Ask for both structures on one stock number. If they will not, shop the next rooftop.

Keep residual value and money factor on the lease worksheet. Keep APR, term, and selling price on the buy worksheet. If either sheet is missing a line, the comparison is theater.

Worked example: 36-month lease vs 60-month loan

A $329 lease for 36 months with $2,499 due at signing costs $14,343 before tax. A $32,995 purchase at 4.9% APR for 60 months with $2,000 down costs about $36,900 in payments plus the down payment — but you still own a car in year five. The lease only wins if you would replace the car anyway.

Lease cash: $329 × 36 = $11,844, plus $2,499 due at signing = $14,343. If you lease again for years four and five at the same payment, add another $7,896, for roughly $22,239 over 60 months — and you still have no car.

Buy cash: $2,000 down plus ~$566/month × 60 ≈ $33,960 in loan payments, totaling about $35,960 before tax and fees. At month 60 you own the vehicle. If it is worth $16,000, your net five-year cost is near $20,000 plus tax — often cheaper than two leases if you keep it.

When leasing is the cheaper path

Leasing wins when factory lease cash is rich, you stay inside 10,000–12,000 miles per year, and you would trade the car at three years anyway. It also wins if you need a payment under a hard monthly budget and cannot post a large down payment on a purchase.

Luxury brands often subsidize residuals. A $499 BMW lease can beat financing the same car at sticker if the residual is 62% and you would never keep it 8 years. Mainstream brands sometimes do the opposite: cheap APR, weak lease cash.

Mileage is the silent lease killer. 15,000 miles per year on a 12,000-mile contract is 9,000 extra miles over 36 months. At $0.25/mile that is $2,250 — enough to erase a “great” $279 payment.

When buying is the cheaper path

Buying wins if you keep cars 6–10 years, drive more than ~15,000 miles a year, or the lease residual is below market so the buyout will be expensive. It also wins when 0–2.9% APR specials are stronger than the lease cash on that model.

High-mileage commuters should not lease unless they buy extra miles up front and still like the math. Excess-mile rates at turn-in are rarely a bargain.

If you always buy out the lease, you paid acquisition fees and a money factor for the privilege of a balloon. Price the purchase on day one instead.

Taxes, fees, and credit tier

Lease tax is often paid on each monthly payment; purchase tax is often paid on the full capitalized cost or selling price depending on the state. Acquisition fees ($595–$1,095) sit on leases. Doc fees sit on both. A money factor based on top-tier credit will not apply if you are not that tier.

Ask the dealer which tax method your state uses on leases. A $329 payment can become $360 after tax in some counties. Compare after-tax cash if you can get both worksheets.

Never shop a “with approved credit” banner as if it were your payment. If your score is in the mid-600s, demand a quote at that tier or walk.

How to use iwantcardeals.com for this decision

Filter new deals to the make you want, open two or three dealer source pages, and request a lease worksheet and a retail worksheet on the same trim. Use our total-lease-cost guide and the compare-page calculator for the lease side; use the OTD guide for the buy side.

Our cards show advertised payments, not your personalized APR. Treat them as a map of which rooftops are aggressive this week, then confirm.

If two dealers advertise $299 and $349 on the same model, start with the $299 store — but only after you confirm DAS, miles, and trim.

Five-year checklist before you sign either path

Write five-year cash for lease-then-lease versus buy-and-hold, including DAS, a second acquisition fee if you lease again, expected excess miles, and a conservative residual or resale number. If you cannot fill those lines, you are not deciding yet — you are reacting to a monthly payment poster.

Bring two worksheets to the same Saturday: lease disclosure (cap cost, residual, money factor, miles) and retail buy (selling price, APR, term, doc fee). If a desk will only produce one, shop the desk that produces both. Time spent waiting for “the manager” is usually worth less than a PDF from the second store.

If you drive 15,000 miles a year, default to buy unless the lease includes 15,000 miles and the five-year lease-twice total still wins. If you keep cars until they rust, default to buy. If you want a new car every 36 months and factory lease cash is rich, default to lease — then still compute total cost so a fat DAS does not fool you.

Taxes, insurance, and the car you already own

Five-year cash is incomplete until you add the same tax and insurance assumptions to both paths and decide what happens to the car you drive today. A lease DAS and a purchase down payment are not interchangeable if one deal rolls your trade and the other does not.

Sales tax on a purchase is usually on selling price. Tax on a lease is often on each payment, on DAS, or both, depending on the state. Do not copy a Florida worksheet into a New York decision. If you do not know the rule, ask both desks to tax the quote for your garage ZIP and compare those PDFs, not the pretax posters.

Insurance quotes can flip a close race. A new financed SUV may cost more to insure than a three-year-old used car with a smaller gap exposure, or the reverse if you lease a high-theft model. Get two insurance quotes on the same day you get two dealer worksheets. Gap insurance is often bundled into leases; on a purchase it is a separate line.

If you still owe on a trade, payoff is part of five-year cash either way. A lease that “pays off your trade” is usually rolling negative equity into cap cost, which you repay with interest in the money factor. A purchase that does the same rolls it into the loan. Write the payoff as its own line so a pretty monthly payment cannot hide it.

Common questions

Is leasing always more expensive long term?

No. Factory-subsidized leases can beat retail finance if you would swap cars at lease end. Keepers who hold 8+ years usually win by buying and paying the car off.

Can I buy the car at lease end?

Most leases include a residual buyout. Compare that number to local used prices 90 days before turn-in. If the residual is high, walk away. If it is low, buying can be a deal.

Should I put money down on a lease?

Usually no. Cash down lowers the payment but is lost if the car is totaled. Compare zero-down quotes first; use due-at-signing only for first month, fees, and tax you cannot avoid.