Is leasing or buying a car cheaper?

Leasing typically has lower monthly payments but you own nothing at the end. Buying costs more monthly but builds equity. Over multiple vehicle cycles (10+ years), buying and keeping a car long-term is almost always cheaper than perpetually leasing.

What is a money factor in a car lease?

The money factor is the lease equivalent of an interest rate. Multiply it by 2,400 to get the approximate APR. A money factor of 0.0025 equals roughly 6% APR. Always compare the money factor to a loan APR before deciding.

What are the hidden costs of leasing?

Mileage overage fees (typically $0.15–0.30 per mile over the limit), wear-and-tear charges at turn-in, disposition fees (~$300–$500), and the fact that you repeat acquisition costs every few years.

When does leasing make financial sense?

Leasing can make sense for business owners who can deduct payments, drivers who want a new car every 3 years, or in markets with very favorable residual values and money factors. For most personal use, buying a reliable used car outright wins financially.

Car Lease vs Buy Calculator

Find the true total cost of leasing vs. buying a car over any ownership period. Accounts for loan payments, residual value, drive-off fees, and depreciation — not just the monthly payment.

Buy is cheaper

$6,731

Over 5 years: buying costs $24,269 net, leasing costs $31,000 net.

Buy net cost

$24,269

Buy monthly equivalent

$404

Lease net cost

$31,000

Lease monthly equivalent

$517

Buy cumulative net cost (payments − residual value)Lease cumulative cost (drive-offs + payments)

Leasing vs. buying: the real math

Car dealers heavily promote leasing because it's more profitable for them. You pay less in monthly payments, but you never build equity and you're locked into a new payment every few years forever. Buying a car and keeping it for 10+ years is almost always cheaper over the long run, but leasing has real advantages for certain drivers.

The key comparison isn't monthly payments — it's total cost of ownership. A lease might be $200/month cheaper than a buy, but after 3 years you own nothing. A 3-year lease cycle costs roughly $10,000–$15,000 in total payments with nothing to show for it. A comparable loan payment of $400/month over 5 years might cost more per month, but after the loan is paid off you have a car payment of $0 for the remaining 5 years of that cycle.

Why it matters to your money

Cars are typically the second-largest expense after housing. Over a 30-year driving career, the total cost of perpetual leasing or buying new can easily exceed $300,000. Understanding the real cost difference between leasing and buying helps you make a decision based on numbers, not dealer pressure or the allure of a new car every few years.

Read the full explainer on leasing vs. buying a car for a deeper breakdown of money factors, residual values, and the specific situations where leasing actually makes financial sense.

Rules of thumb

Buying and keeping 10+ years wins: After the loan is paid off, you have $0 car payments for years. This strategy saves the most over a lifetime.
Leasing makes sense when: You drive under the mileage limit, want warranty coverage on every car, or can deduct payments as a business expense. For most personal-use drivers, buying wins.
Buy 2–3 year old used cars: They've absorbed the steepest depreciation (15–25% in year one) while still having most of their useful life ahead. This is the single biggest money-saver on car ownership.

Frequently asked questions

Is leasing or buying a car cheaper?: Leasing typically has lower monthly payments but you own nothing at the end. Buying costs more monthly but builds equity. Over multiple vehicle cycles (10+ years), buying and keeping a car long-term is almost always cheaper than perpetually leasing.
What is a money factor in a car lease?: The money factor is the lease equivalent of an interest rate. Multiply it by 2,400 to get the approximate APR. A money factor of 0.0025 equals roughly 6% APR. Always compare the money factor to a loan APR before deciding.
What are the hidden costs of leasing?: Mileage overage fees (typically $0.15–0.30 per mile over the limit), wear-and-tear charges at turn-in, disposition fees (~$300–$500), and the fact that you repeat acquisition costs every few years.
When does leasing make financial sense?: Leasing can make sense for business owners who can deduct payments, drivers who want a new car every 3 years, or in markets with very favorable residual values and money factors. For most personal use, buying a reliable used car outright wins financially.