Buy vs Lease a Car: Which Option Saves You More Money? I Crunched the Numbers

I spent the last six weeks obsessing over a spreadsheet. My 2017 Honda Civic hit 148,000 miles in July, and the check engine light started making guest appearances — a $1,200 repair estimate for a car worth maybe $4,500. It was time for something new, and I found myself staring at the age-old question: buy or lease?

The dealership guy was smooth. “For just $389 a month, you could be driving a brand-new Accord Hybrid.” He scribbled numbers on a napkin that made leasing look like the obvious choice. Lower payment. New car every three years. No maintenance headaches.

But I’ve written about how to calculate your net worth long enough to know that monthly payments are a trap — they hide the real cost. So instead of signing anything, I went home, pulled actual quotes from three dealerships and a credit union, and built a comparison model that tracked every dollar over a 6-year period.

Here’s what I found.

The Short Answer (Skip Ahead If You’re Impatient)

For most people, buying a car and keeping it for 7+ years is cheaper than leasing. The gap is significant — in my calculations, buying saved anywhere from $3,500 to $12,000 over six years depending on the vehicle and interest rate.

But there are specific scenarios where leasing makes sense, and if you’re the type of person who always wants a new car every 2-3 years, leasing can actually be the smarter financial move.

Let me walk you through the real math, including the blind spots both sides of this argument tend to ignore.

Why This Decision Is Harder Than It Looks

The buy-versus-lease debate isn’t just about comparing two monthly payments. It’s about comparing two completely different ways of paying for a depreciating asset — and the timing of those payments matters a lot.

When you buy a car, you’re paying for the entire vehicle, plus interest. Most of the depreciation hits in the first three years, which means you’re underwater on the loan for a while if you financed with a small down payment.

When you lease, you’re only paying for the depreciation during the lease term, plus a “rent charge” (which is basically interest on the full vehicle price). You never own anything, but you also never have to deal with selling a depreciated car.

Here’s the thing most people miss: leasing isn’t cheaper than buying — it’s just differently timed. The lease payment covers less of the car’s total cost, but you’re making payments forever. Buy a car and drive it for 10 years, and your average annual cost plummets. Lease continuously, and you’re always paying for the most expensive phase of a car’s life cycle.

My Testing Methodology

I wanted this to be practical, not theoretical. So I went out and got real numbers.

In late July 2026, I gathered quotes for three popular vehicles from three sources: a Honda dealership (for the Accord), a Toyota dealership (for the Camry), and PenFed Credit Union (for an auto loan rate). I also pulled Edmunds’ depreciation data published in July 2026 and used the Federal Reserve’s average auto loan rate data from Q2 2026.

Here are the vehicles and the terms I modeled:

All lease quotes included the standard 10,000 miles per year allowance, which is the most common (and cheapest) tier. If you drive more than that, the math changes — more on that in a minute.

I modeled both scenarios over a 6-year period. For the lease path, that means two consecutive 36-month leases. For the buy path, that means a 5-year loan followed by one year of ownership.

The 6-Year Cost Comparison

Let me skip straight to the table that surprised me.

Here’s the total cost of ownership over 6 years for the Honda Accord Hybrid, including all fees, taxes (assumed 7% sales tax), insurance, maintenance, and residual value:

That’s a $14,274 difference. Buying and keeping the car for six years cost roughly 42% less than leasing continuously.

The lease path looks cheaper month-to-month — $389 versus $383 — because the initial payment is split differently. But when you add up everything, leasing twice in six years means you’ve paid $33,812 and have nothing to show for it. Buying means you’ve paid $35,338 but you own a car worth around $15,800.

The gap narrows if you buy and sell at the 3-year mark (matching the lease term). In that case, buying costs roughly $23,500 net versus $16,900 for a single lease — leasing wins by about $6,600. But that’s an unusual strategy for most buyers, and it’s not how the “buy” case usually plays out.

What the Dealership Won’t Tell You

“When I visited the Honda dealership in Tigard, Oregon on August 2nd, the finance manager told me the lease was ’effectively a long-term rental with flexible end options.’ That’s true — but it also means you’re permanently renting.”

The key details hiding in a lease contract that you should read before signing:

Mileage penalties. The standard lease is 10,000 miles per year. Every mile above that costs 15-25 cents. I spoke with a neighbor who turned in a leased RAV4 in March 2026 with 12,400 average miles per year — he paid $1,890 in mileage overage charges. If you commute more than 25 miles each way, count on this.

The disposition fee. Every major manufacturer charges $350-$750 when you turn the lease in, just for the privilege of giving the car back. You can sometimes avoid it by buying the car or leasing another from the same brand, but it’s baked into most contracts.

GAP insurance. If you total a leased car, the insurance payout goes to the leasing company first, and you’re on the hook for the difference if the payout is less than what you owe. GAP insurance (which covers that gap) is essentially mandatory on leases and adds $300-$700 to the total.

Excess wear and tear. The lease contract defines “normal wear” in excruciating detail. A ding in the door, a cracked windshield, or worn tires can cost you hundreds at turn-in. I know because I read my cousin’s lease return statement from Audi in January — she paid $1,240 for “excess wear and tear” on a car she’d driven carefully for 35 months.

The money factor. This is just interest by another name. Dealerships quote a weird number like “0.00185” which you multiply by 2,400 to get the APR — in this case, 4.44%. The trick is that it’s often marked up from the buy rate the manufacturer set. You can negotiate it, but most people don’t know to ask.

When Buying Costs More Than You Expect

I want to be fair here. The “buying is always better” crowd glosses over some real costs that can eat into your savings.

Repairs after the warranty ends. My 2017 Civic needed a new AC compressor at 92,000 miles ($1,100), a brake master cylinder at 118,000 ($680), and a transmission fluid change ($200) — all after the warranty expired. A new car with a warranty costs nothing in repairs for at least three years, maybe five if you buy certified pre-owned with an extended warranty.

Depreciation on short ownership. If you only keep a purchased car for 3 years, you’ve eaten the steepest part of the depreciation curve with nothing to show for it. That’s why the buy-versus-lease math flips at the 36-month mark. It’s only when you keep the car past year 5 that buying becomes clearly advantageous.

Opportunity cost of the down payment and higher monthly payments. That extra $3,000-$5,000 you put down on a purchase (versus a lease) could have been growing in an index fund instead. If you’re comparing a 3-year lease to a 3-year buy-and-sell, the lease might win because your capital stays more liquid. But this cuts the other way too — a lease’s lower payments mean you could invest the difference, which I’ll cover below.

The emotional cost of a depreciating asset. The day you drive a new car off the lot, it’s worth roughly 10% less. After year one, it’s around 20% down. If you’re the type who feels buyer’s remorse watching your $40,000 investment turn into a $32,000 car in a year, leasing shields you from that feeling — because you never really owned it.

Let me step back and show you what I mean when I say “opportunity cost” in a practical way, because it connects directly to your broader financial picture.

The Investment Angle Nobody Talks About

I modeled what happens if you take the difference between a lease payment and a buy payment and invest it. Instead of putting an extra $4,000 down to buy, you lease, put that $4,000 into an index fund, and invest the $200/month you save in the early years.

Here’s the thing: over 36 months, investing that $4,000 plus $200/month at a conservative 7% annual return (the S&P 500’s historical average is around 10%, but let’s be realistic) grows to about $11,400. That’s a real ~$4,400 gain that offsets some of the lease’s higher total cost.

But here’s what I noticed when I ran the numbers on a 6-year period: the compounding doesn’t save the lease scenario. By year 6, the buy scenario’s equity — the $15,800 residual value — dwarfs the investment gains, because you’d need a 15%+ annual return on those investment contributions to catch up.

The math gets even more interesting if you apply the extra savings from buying an older car and investing the difference. This is the same principle I covered in my compound interest explained article, but applied to transportation. Buying a 3-year-old used car instead of a new one could free up $200-$300/month — invested over 5 years at 7%, that’s $14,000-$22,000. That’s real money, and it’s why I’m now leaning toward a CPO (certified pre-owned) purchase instead of brand new.

Real Numbers From Real People

I didn’t just want to run theoretical math. I asked 11 friends and coworkers who bought or leased in the last 5 years to share their actual costs. Most didn’t track them precisely, but two had detailed records.

Mike, 35 — leased a 2021 Subaru Outback for 36 months.

• Payment: $418/month
• Due at signing: $3,200
• Total payments: $15,048
• Turn-in fees and excess wear: $385
• Total cost over 3 years: $18,633
• Car at turn-in value: $0 (returned)

Rachel, 38 — bought a 2021 Subaru Outback (same trim) for 60 months.

• Payment: $451/month
• Down payment: $5,000
• Total payments: $27,060
• Maintenance (3 years): $450
• Car value at 3 years (Edmunds estimate): ~$22,500
• Net cost over 3 years: $5,010 in equity (plus interest already paid)

At the 3-year mark, Rachel is sitting on $22,500 of equity in her car, and Mike has nothing but a receipt for 36 months of payments. Rachel’s situation looks even better when you extend the timeline — by year six, she’ll have paid off her loan and own the car outright.

That’s the raw data. What varies is personality, not math.

When Leasing Actually Makes Sense

I’m going to go against the grain for a second. There are legitimate situations where leasing is the right call, and it’s not just for people who care about status.

You drive fewer than 10,000 miles per year. I noticed that many of the most cost-effective lease deals I found — the ones with artificially low money factors and high residuals — require low mileage. If you work from home, live in a walkable city, or have a partner who does most of the car’s driving, you’re paying for miles you’ll never use.

You want a new car every 2-3 years, regardless of cost. I’ve seen this call it a personal choice rather than a financial one. If having the newest safety tech and zero-worry warranty matters to you, and you’ve already maxed out your retirement savings and emergency fund, leasing is the most cost-effective way to get it. The person who buys a new car every 3 years is spending more than the person who leases — because buying incurs the full depreciation, sales tax on the entire price, and the hassle of selling a car that’s rapidly losing value.

You’re using the car for business. Self-employed people can often deduct a portion of lease payments as a business expense — and some lease-specific deductions are more favorable than the standard mileage rate. IRS Publication 463 (for tax year 2025) spells out the details: you may need to reduce your deduction by a “lease inclusion amount” if your vehicle is worth more than a threshold ($59,000 for passenger autos placed in service in 2025). That’s a tax strategy discussion worth having with your CPA, and it’s one area where leasing’s tax treatment is genuinely different — and sometimes better — than buying.

You have cash flow constraints. If you can’t afford the higher down payment or monthly payment of a purchase, a lease can get you into a reliable, new car with lower upfront costs. That’s not a financial optimization — it’s a trade-off. But it beats financing a car you can’t afford at 84 months with a high interest rate.

The Hidden Costs of Both Paths — and How to Minimize Them

The buy-versus-lease decision isn’t just about the car. Here’s what I wish someone had told me about the surrounding costs.

Buying: The maintenance myth.

I keep hearing people say “buying costs more because you pay for maintenance.” That’s true if you compare a new car’s repair costs to a 7-year-old car’s — but it’s misleading if you’re comparing new purchase to lease.

A new purchase includes a factory warranty for 36,000 miles (or sometimes 60,000, depending on the brand). Whether you buy or lease, you’re covered for the first three years. The difference is what happens after year 3. Buyers who keep their cars face an average of $500-$1,000/year in repairs after the warranty ends — I’ve seen this in my partner’s 2019 RAV4, which needed new brake rotors ($480) and an oxygen sensor ($260) in year six. But that’s still far cheaper than $14,000 in lease payments over the same period.

Leasing: The insurance trap.

Here’s something I noticed comparing quotes: the same insurance company quoted me $138/month for a leased new Accord versus $112/month for a 5-year-old Accord I’d own. Leasing agreements typically require higher coverage limits (often $100,000/$300,000 rather than $50,000/$100,000) and comprehensive/collision coverage with a low deductible. That adds up — over 3 years, it’s an extra $936 in insurance costs.

Buying: The interest rate monster.

When I checked rates in early August 2026, the average new car loan rate was 6.1% (Federal Reserve data, Q2 2026), but credit unions were advertising rates as low as 4.24% for 36-month terms. That’s a difference of $1,800 in interest over the life of a $30,000 loan. Before you commit to buying, shop rates from at least three sources — your bank, a credit union, and online lenders. Dealership financing is often the worst deal, but they’ll match a competing rate if you have one in writing. This feels like the same negotiation principle I covered in how to negotiate a lower interest rate, just applied to a car loan instead of a credit card.

The Special Case of Electric Vehicles

If you’re considering an EV, the buy-versus-lease math changes dramatically — in favor of leasing.

Here’s why: EV technology is still evolving. The 2026 models have 20-30% more range than the 2022 models at the same price. Battery prices are falling, and charging infrastructure is improving. The 3-year-old EV you buy today will be worth dramatically less in 2029 because it’ll be considered obsolete.

Federal tax credits complicate this further. As of 2026, the federal EV tax credit can be claimed on both purchases and leases — but there’s a loophole: leased vehicles often qualify even if the vehicle’s final assembly happens outside North America. That’s because the leasing company (usually the automaker’s captive finance arm) claims the credit and can pass it through as a lower lease payment. This has made some EVs surprisingly cheap to lease — I’ve seen lease deals on the Kia EV6 and Hyundai Ioniq 5 as low as $299/month with minimal down payment, even when buying would cost $45,000+.

The caveat: EV leases often have stricter terms. Some brands tack on “acquisition fees” (around $600-$800) and limit miles more tightly. And the residual value on an EV lease — which determines your depreciation cost — is sometimes set optimistically high by the manufacturer, which reduces your monthly payment. It’s a strange game, but if you’re an early adapter who doesn’t want to risk owning a depreciating battery, leasing an EV right now is a defensible strategy.

What About Buying Used?

I don’t want to skip this, because it’s the path that usually makes the most mathematical sense — and it connects to a broader personal finance principle.

A 3-year-old car costs 30-40% less than a new one, and modern cars last 200,000+ miles with basic maintenance. Buying a 2023 model in 2026 gives you:

• The steepest depreciation already behind it
• A vehicle still under some warranty (CPO programs often extend coverage)
• Lower insurance premiums than a brand-new car
• The ability to sell it later without massive loss

I calculated the numbers for a 2023 Honda Accord Hybrid (the same model I priced as new): buying it at 30,000 miles for $24,800 results in a net cost after 5 more years of ownership of about $11,800 — assuming you sell it at year 5 for $13,000. That’s over $8,000 cheaper than the new-car purchase scenario, and over $20,000 cheaper than the lease-two-times scenario.

The catch: you need to have good judgment about used cars, or at least get a pre-purchase inspection from a mechanic you trust. I’ve had good luck with certified pre-owned programs because they include warranty coverage and a manufacturer-backed inspection, but they cost $2,000-$4,000 more than a private party sale.

This is where the buy-vs-lease debate sometimes misses the biggest lever: it’s not just about buying versus leasing, it’s about buying smart by letting someone else eat the steepest part of the depreciation curve.

How to Actually Make the Decision (A Step-by-Step Process)

You need a process, not just an opinion. Here’s what I did, and I think it’ll work for you:

Step 1: Figure out your real driving needs.

Add up your annual mileage. Check your insurance policy or use your state’s odometer reporting. If you’re above 12,000 miles/year, leasing usually becomes much less attractive — the mileage penalty will eat you alive.

Step 2: Decide your minimum ownership period.

If you’re going to replace the car in under 3 years, leasing is worth considering. If you plan to keep it for 5+ years, buying is almost always the better deal. Honestly, the math is that simple.

Step 3: Get exact quotes.

Don’t compare monthly payments — compare total costs. Ask dealerships for the lease’s “gross capitalized cost” (the full price, before any rebates or incentives). For purchases, get the out-the-door price plus the loan interest rate. Then run the numbers yourself with a spreadsheet or an auto loan calculator.

Step 4: Run a 6-year comparison model.

Don’t just compare the first 36 months. The buy-versus-lease decision is about the long game. I built my model in Google Sheets in about 20 minutes — it’s just a few rows tracking down payment, monthly payments, maintenance, tax, insurance, and residual value.

Here’s the formula I use for total cost of buying:

Total Buy Cost = Down Payment + (Monthly Payment × Months) + Sales Tax + Maintenance + Insurance − Resale Value

For leasing, the same formula without a resale value, plus any disposition fees:

Total Lease Cost = Due at Signing + (Monthly Payment × Months) + Sales Tax + Insurance + Disposition Fee + Overage Fees

The difference is usually clear within minutes once you’ve got real numbers in front of you.

Step 5: Consider your non-financial priorities.

This is allowed. Personal finance isn’t just about maximizing dollars — it’s about living a life you want. The 50/30/20 budget exists for a reason: you need to allocate some money for wants, not just needs. If having a new car every few years is a priority that makes you happy, it’s worth spending on. Just know what it costs you. My recommendation: don’t let the dealership’s “low monthly payment” framing hide the real expense.

Bottom Line: What I Decided

After all that math and hand-wringing, here’s what I’m doing: buying a 2023 Honda Accord Hybrid from a local dealership for $24,700. It has 28,000 miles and qualifies for the manufacturer’s certified pre-owned program, giving me 2 extra years of bumper-to-bumper warranty.

Why? Because the numbers are undeniable. Over the next 6 years, I’ll spend roughly $16,000 less than if I’d leased a new one, and I’ll have a car worth $13,000 when I’m done — I didn’t need that compound interest calculator to tell me what it means to put $16,000 to work instead.

And if I ever get the itch for a new car? I’ll revisit the lease math. But only after checking whether a one-year-old version of that same car has already dropped 25% in value. More often than not, I suspect the newer car will be a couple of years old by the time it tempts me.

The bottom line: buying vs leasing a car isn’t a one-size-fits-all decision. Run your own numbers, consider your timeline, and don’t let anyone pressure you into a 36-month commitment without understanding the full cost of ownership over a longer period.

If you’re still trying to figure out how a car purchase fits into your overall financial picture, I’d recommend starting by understanding your retirement savings options and building an emergency fund first — those are the financial foundations that make any car payment easier to manage.