Should I lease or finance a car?
A lease almost always has the lower monthly payment, which is exactly why comparing payments is the wrong move. Financing builds equity in an asset you keep; leasing buys use of a car for a fixed term and leaves you with nothing at the end. Compare total cost net of what the car is still worth.
A $42,000 car leased at $480/month versus financed at 6.9%, over 36 months:
Leasing costs $7 less. Lease $20,280 ($480/month) vs buying $20,287 net of $26,000 equity ($1,202/month).
Leasing wins when
- You replace your car every two to three years anyway
- You want a predictable payment and warranty coverage for the whole term
- You drive modest, predictable mileage that stays inside the lease allowance
- You can deduct the payment as a business expense
Buying wins when
- You keep cars well past the point they are paid off — the cheapest years of ownership
- You drive high mileage that would trigger lease overage charges
- You want to own an asset, modify it, or sell whenever you like
The bottom line
Leasing usually costs more over any long horizon, because you are always paying for a car's steepest depreciation years and never reaching the paid-off period. It buys convenience and predictability, which is a legitimate thing to buy — as long as you know the price.
Run it with your numbers