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Short answer
Over 36 months, a default lease costs about $24,978 in cash with no car at the end. Buying the same car on a 36-month loan costs about $50,325 in cash but leaves a car valued near $26,880.
1. Assumptions
- Car with $48,000 MSRP negotiated to $44,500, with a $1,000 rebate.
- Lease: $2,500 down, 56% residual, 0.00225 money factor, $895 acquisition fee, $395 disposition fee, 8% tax on each payment.
- Buy: 10% down, 8% sales tax up front, 5.4% APR (the lease's equivalent rate).
- After 36 months the car is worth the lease residual, $26,880.
2. Comparison
| Lease | Buy, 36-month loan | Buy, 72-month loan | |
|---|---|---|---|
| Monthly payment | $588.55 (with tax) | $1,180.40 | $637.80 |
| Cash at signing | $3,984 (down, fee, first payment) | $7,830 | $7,830 |
| Total cash paid over 36 months | $24,978 (incl. $395 disposition fee) | $50,325 | $30,791 |
| Loan balance after 36 months | None | $0 | $21,154 |
| Car value at month 36 (assumed = residual) | You return it | $26,880 | $26,880 |
| Net cost after counting the car's value | $24,978 | $23,445 | $25,064 |
3. What it shows
- Lease payments are lower than loan payments, but all of the money is spent with nothing owned at the end.
- The 36-month loan has the highest payment but the lowest net cost, because the car keeps its value.
- The 72-month loan lowers the payment but still leaves a balance of about $21,154 at month 36.
4. When each makes sense
- Lease: you want a lower payment, a new car every few years and you stay within the mileage limit.
- Buy: you drive a lot, keep cars for years and want to own the car.
Results change with the price, rate, residual and tax rules in your state, so run your own numbers in the Car Lease Calculator.
5. Frequently asked questions
Is it cheaper to lease or buy a car?expand_more
It depends on the price, residual, rate and how long you keep the car. Over 36 months in this example, buying on a 36-month loan has the lowest net cost, while the lease has the lowest payment.
Why is the lease payment lower?expand_more
You only pay for the depreciation and a finance charge, not the whole price.
Do I own anything at the end of a lease?expand_more
No, unless you buy the car for the residual price.
What does the comparison assume?expand_more
10% down, 8% tax, a 5.4% APR and a car value equal to the lease residual after 36 months.