Guide
The monthly payment is the worst way to compare leasing and buying, because it hides what happens over time. A $400 lease and a $560 loan look far apart — until you remember that after the loan is paid off you own a car worth thousands, while the lease starts over with nothing. To compare honestly, you have to look at total cost of ownership: every dollar out of pocket over a set period, minus the value of what you own at the end. That single reframing changes the answer for a lot of people.
That last line is the one most quick comparisons leave out, and it's often the deciding factor. Money spent on a loan doesn't vanish the way lease payments do — a chunk of it converts into an asset you can sell, trade, or keep driving for free.
Over a short window — say three years — leasing often costs less, because you never pay for the full car and payments are lower. But depreciation, the biggest cost of any car, is steepest in the early years; a typical new car can lose a large share of its value in the first three years. A buyer absorbs that heavy early depreciation and then benefits: once the loan ends, they drive payment-free while still owning a car with meaningful resale value. A perpetual leaser, by contrast, keeps paying forever and never builds a cent of equity. The longer the timeline, the more that difference compounds in the buyer's favor.
Think about the same car over three timeframes:
Take a $35,000 car. If you lease it back-to-back, you might pay around $400/month plus roughly $2,000 down and $1,300 in fees per 3-year cycle. Over six years that's two cycles: about $28,800 in payments plus $4,000 in down payments plus $2,600 in fees — roughly $35,400 spent, and you own nothing at the end. You're right back where you started, needing another car.
Now buy the same $35,000 car with $5,000 down and a 60-month loan at 6.5%. You'd pay about $6,700 in total interest, so your cash out over six years is roughly $5,000 down plus $35,000 principal-equivalent-plus-interest — call it about $41,700 including tax. But at year six the loan is gone, you have no payment, and you still own a car worth perhaps $13,000–$15,000. Subtract that retained value and your net six-year cost lands near $27,000–$29,000 — comfortably below the two-lease path, with a paid-off car in the driveway. Your exact figures depend on rates, taxes, and depreciation, which is what the lease vs buy calculator computes for you.
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Interest quietly inflates the total on both paths, so it belongs in any honest comparison. The Federal Reserve's G.19 Consumer Credit release pegged the average 60-month new-car loan at commercial banks near 7.1% in mid-2026, with finance companies averaging about 6.1% and an average amount financed of roughly $42,500. At those rates, financing a $35,000 purchase over five years adds several thousand dollars of interest to the sticker price — money that buys you nothing but the loan itself. A lease carries the same drag through its money factor, which the Federal Trade Commission's financing-or-leasing guide explains is just an interest rate in disguise (multiply it by 2,400 for the approximate APR). The lesson for total cost of ownership is simple: a lower rate shrinks the total on either path, so shop the financing as hard as you shop the car, and fold the interest into the six- or ten-year figure rather than fixating on the monthly number.
A larger down payment on a purchase ties up cash that could have earned a return if invested. Factoring that in makes the comparison fairer — and it's a piece most quick comparisons skip. The lease vs buy calculator builds all of this in: payments, fees, depreciation, resale value, and opportunity cost, charted over the full term so you can see exactly when buying overtakes leasing for your car. For a neutral overview of how these costs stack up, the Consumer Financial Protection Bureau is a solid reference.
Why does buying beat leasing over the long run? Because loan payments end while lease payments don't. Once a purchased car is paid off, you drive it for years at only the cost of upkeep, and you still own a resellable asset. A perpetual leaser always has a payment and never builds equity.
Does total cost of ownership include insurance and maintenance? It should. A new leased car is under warranty but may cost more to insure; an older owned car may need more repairs but less coverage. Including these makes the comparison honest, though the biggest swing is usually payments and retained value.
When is leasing the lower total cost? Mainly over short horizons of about three years, when you avoid the steepest depreciation and enjoy lower payments. Stretch the timeline and buying almost always overtakes it.
→ See total cost over time