Should you lease or buy your next car? Here’s a detailed cost comparison to help you decide.
Quick answer:Buying is usually cheaper over 5+ years. A $35,000 car costs about $42,000 total to buy vs. $30,000 to lease over 3 years — but if you keep the bought car for 10 years, total cost drops to $50,000 vs. $100,000+ for continuous leasing.
Lease vs. Buy: Quick Comparison
Factor
Lease
Buy
Monthly payment
Lower
Higher
Ownership
Never own
Own it
Mileage limits
Yes (12-15k/year)
No limits
Customization
Not allowed
Your choice
End of term
Return car
Keep or sell
Total cost (10 years)
Higher
Lower
Best for
Low mileage, new car lovers
Long-term, high mileage
True Cost Comparison
$40,000 Vehicle Example
Lease Terms:
36-month lease
$3,000 down payment
$350/month
12,000 miles/year limit
Buy Terms:
$40,000 purchase price
$5,000 down payment
60-month loan at 6.5%
Keep car for 10 years
3-Year Comparison
Cost Category
Lease
Buy
Down payment
$3,000
$5,000
Monthly payments
$12,600
$20,388
Insurance
$5,400
$5,400
Maintenance
$300
$1,500
End fees
$500
—
Asset value at end
$0
~$22,000
Net 3-Year Cost
$21,800
~$10,288
5-Year Comparison
Cost Category
Lease (2 terms)
Buy
Payments
$28,200
$33,980
Down payments
$6,000
$5,000
Insurance
$9,000
$8,500
Maintenance
$600
$4,000
End fees
$1,000
—
Asset value at end
$0
~$16,000
Net 5-Year Cost
$44,800
~$35,480
10-Year Comparison
Cost Category
Lease (3+ terms)
Buy
Payments
$56,400
$33,980
Down payments
$12,000
$5,000
Insurance
$18,000
$15,000
Maintenance
$1,200
$12,000
Major repairs
$0
$3,000
End fees
$2,000
—
Asset value at end
$0
~$5,000**
Net 10-Year Cost
$89,600
~$63,980
Buying saves ~$25,000+ over 10 years
Lease Cost Breakdown
Monthly Lease Payment Components
Component
Description
Depreciation
(Cap Cost - Residual) ÷ Term
Finance charge
(Cap Cost + Residual) × Money Factor
Sales tax
Varies by state
Monthly payment
Sum of above
Example Calculation
Item
Value
MSRP
$40,000
Negotiated price (Cap Cost)
$38,000
Residual value (54%)
$21,600
Depreciation over 36 mo.
$16,400
Monthly depreciation
$456
Money factor
0.00200
Monthly finance charge
$119
Monthly payment (pre-tax)
$575
Hidden Lease Costs
Fee
Typical Amount
When
Acquisition fee
$500-$1,000
Lease start
Disposition fee
$300-$500
Lease end
Excess mileage
$0.15-$0.30/mile
End if over
Excess wear
$200-$2,000+
End
Early termination
Thousands
If break lease
Gap insurance
$300-$700
If needed
Mileage Overage Example
Miles Over
At $0.25/mile
1,000 miles
$250
3,000 miles
$750
5,000 miles
$1,250
10,000 miles
$2,500
15,000 miles
$3,750
Buy Cost Breakdown
Monthly Loan Payment
Loan Term
$35,000 Financed
$40,000 Financed
48 mo. @ 6.5%
$829
$948
60 mo. @ 6.5%
$684
$782
72 mo. @ 6.5%
$589
$673
Total Interest Paid
Loan Amount
48 Months
60 Months
72 Months
$30,000
$4,117
$5,183
$6,263
$35,000
$4,803
$6,047
$7,307
$40,000
$5,489
$6,911
$8,351
When Leasing Makes Sense
Situation
Why Lease
Drive < 12,000 miles/year
Won’t hit mileage limits
Want new car every 2-3 years
Always have latest features
Business use (tax deductible)
Can deduct lease payments
Short-term need
Moving soon, uncertain situation
Want lower monthly payments
Cash flow priority
Hate dealing with repairs
Car always under warranty
When Buying Makes Sense
Situation
Why Buy
Drive > 15,000 miles/year
No mileage penalties
Keep cars 5+ years
Best long-term value
Want to modify/customize
Your car, your rules
Build equity
Can sell or trade
Variable driving needs
No restrictions
Want to own outright
No perpetual payments
Break-Even Analysis
How long until buying beats leasing?
Scenario
Break-Even Point
Economy car ($30k)
~4 years
Mid-range car ($40k)
~4-5 years
Luxury car ($60k)
~5-6 years
High-depreciation car
~3-4 years
Low-depreciation car (Toyota, Honda)
~4-5 years
Key insight: If you keep a bought car past the break-even point, every additional year is almost “free” (just maintenance).
Cost Per Mile Comparison
$40,000 Vehicle, 15,000 Miles/Year
Ownership Period
Lease Cost/Mile
Buy Cost/Mile
Year 1-3
$0.49
$0.45
Year 4-6
$0.49
$0.25
Year 7-10
$0.49
$0.18
Long-term ownership dramatically reduces cost per mile.
Depreciation Reality Check
New cars depreciate rapidly:
Year
Approximate Value
% Lost
Purchase
$40,000
0%
Year 1
$34,000
15%
Year 2
$29,000
27%
Year 3
$25,000
37%
Year 5
$18,000
55%
Year 7
$13,000
67%
Year 10
$8,000
80%
When you lease, you pay for the steepest depreciation (years 1-3).
Alternative: Buy Used
3-Year-Old Used Car Purchase
Scenario
Cost
3-year-old car (was $40k new)
~$25,000
Let someone else pay first 3 years depreciation
-$15,000
Keep for 5 more years
Low cost
Total 5-year cost
~$18,000 (including maintenance)
Buying used = best of both worlds
Decision Framework
Lease If:
☐ Low annual mileage (< 12,000)
☐ Want new car every 2-3 years
☐ Cash flow is priority over total cost
☐ Business use with tax benefits
☐ Don’t want maintenance hassles
☐ Comfortable never owning
Buy New If:
☐ Plan to keep 5+ years
☐ Drive > 15,000 miles/year
☐ Want to customize
☐ Want to build equity
☐ Prefer no mileage restrictions
☐ Value long-term savings
Buy Used If:
☐ Maximum value priority
☐ Don’t need newest features
☐ Plan to keep 5+ years
☐ Comfortable with some miles
Total Cost Summary
Strategy
10-Year Total Cost
Lease continuously
$90,000-$120,000
Buy new, keep 5 years, repeat
$70,000-$90,000
Buy new, keep 10 years
$55,000-$70,000
Buy 2-year-old used, keep 8 years
$40,000-$55,000
Buy 3-year-old used, keep 7 years
$35,000-$50,000
Bottom Line
Leasing has lower monthly payments but costs more long-term
Buying is almost always cheaper if you keep the car 5+ years
Over 10 years, buying saves $20,000-$40,000 vs. continuous leasing
Leasing makes sense for low-mileage drivers who want new cars every 2-3 years
Best value: Buy a 2-3 year old used car and keep it 7+ years
Consider total cost of ownership, not just monthly payment
WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy
