The Year Buying a Car Overtakes Leasing, and Why It Comes After the Lease Ends

A lease payment is almost always lower than a loan payment on the same car, and that is the comparison most buyers see. It is the wrong one. A lease pays for the car’s use for a few years; a loan pays for the car itself, which still has value when the loan ends. The useful question is which path costs less over the same number of years, and when that changes.

This analysis uses the defaults of the buy vs lease calculator: a car with a $38,000 MSRP and a negotiated price of $36,000, a 36-month lease with a 58% residual, a 0.00225 money factor, $2,000 down, a $695 acquisition fee and a $395 disposition fee; or a purchase with $2,000 down, financed at 6.5% over 60 months, with 6% sales tax and $600 a year of extra maintenance after the third year. Each lease is replaced by an identical one when it ends.

How the lease payment is built

The Federal Trade Commission describes a lease payment as the car’s expected depreciation during the lease, plus a rent charge, taxes and fees. Here the capitalized cost is $36,000 plus the $695 fee, less the $2,000 down payment: $34,695. The residual, 58% of the MSRP, is $22,040. Depreciation is the difference spread over 36 months, $351.53 a month. The rent charge is the capitalized cost plus the residual, $56,735, times the money factor, $127.65 a month. With 6% tax, the payment is $507.93.

The money factor converts to an approximate annual rate by multiplying by 2,400, because the rent charge is effectively the average of the capitalized cost and the residual times a monthly rate. At 0.00225 the lease’s implied rate is about 5.4%, below the 6.5% on the loan.

The year-by-year comparison

The purchase finances $36,000 plus 6% tax, less $2,000 down: $36,160 at $707.51 a month. Its net cost in any year is what has been paid so far, plus the loan balance, minus what the car would sell for then, using a value curve of 60% after three years and 42% after six.

For the first three years leasing is cheaper, by about $1,000 to $1,500. A new car loses value fastest early on, and the buyer bears that loss through a car that sells for much less than was paid, while the lease charges only for the use. The order flips in year 4, when the second lease begins with a new down payment and acquisition fee, and the buyer’s car is still worth a meaningful share of its price.

Why the gap widens after the loan ends

After month 60 the buyer stops making payments, while the lessee’s payments continue indefinitely. Over three years, leasing costs $20,681 against $21,753 for buying and selling. Over six years it is $41,361 against $31,131. Over nine years, with the car worth 30% of its price, it is $62,042 against $37,251, a difference of $24,791. The owned car’s remaining value and the end of loan payments do most of that work, which is why long ownership periods favor buying so strongly.

Mileage moves the crossover

A lease includes a mileage allowance, and the FTC notes that most standard leases allow 15,000 miles a year or less, with a fee for each mile over. At 15,000 miles a year on a 12,000-mile allowance and 25 cents a mile, each lease adds $2,250 at return. That is enough to make buying cheaper from year 2 instead of year 4, and adds $4,500 to the lease path over six years.

Money down changes the payment, not the comparison

A larger down payment on either path lowers the monthly figure without changing much else. On the lease, $2,000 down reduces the capitalized cost and so both the depreciation and the rent charge on it; the same $2,000 kept and paid monthly instead would cost only the rent charge on it, about $4.50 a month at this money factor. What a lease down payment adds is risk: if the car is totaled or the lease ends early, the money paid upfront is generally not returned. On the purchase, a down payment reduces the amount financed and the interest on it, and the equity it buys is recovered when the car is sold.

One-pay leases and short horizons

Some lessors offer a one-pay lease, in which every payment is made upfront in exchange for a lower rent charge. It changes the financing cost of the lease, not its structure: the lessee still pays for the expected depreciation and still returns the car. For someone who replaces cars every three years anyway, the comparison in the first table is the relevant one, and leasing’s small advantage there can grow if the one-pay discount is large. For anyone who keeps cars longer, the later rows matter more.

When leasing remains the cheaper path

The comparison favors leasing when the car would be replaced every few years anyway: the first-years depreciation is unavoidable for anyone who drives new cars, and a lease with a favorable money factor or a high residual can price it more cheaply than ownership does. It also favors leasing when manufacturers subsidize the residual or the money factor, which shows up directly in a lower payment for the same car. Buying a car and keeping it well past the loan is where the purchase gains most.

Assumptions

As of October 2, 2026. Lease and loan terms are the calculator’s defaults, not market quotes. Sales tax is applied to each lease payment; some states tax the price upfront instead. The depreciation curve (60% of price at three years, 42% at six, 30% at nine) is an illustrative default. Maintenance and insurance other than the $600 a year after the warranty period are treated as equal on both paths.