Is it better to lease or buy a car?

It depends on your situation. Leasing is better if you: drive less than 12,000 miles/year, want lower monthly payments, prefer new cars every 2-3 years, and don't want maintenance worries. Buying is better if you: drive a lot, want to build equity, plan to keep the car 5+ years, or want no mileage restrictions. Generally, buying is more economical long-term (7+ years), while leasing offers lower short-term costs and flexibility.

What are the hidden costs of leasing a car?

Hidden lease costs include: excess mileage fees ($0.15-$0.30/mile over limit), wear and tear charges (scratches, dents, tire wear), disposition fee ($300-$500 at lease end), acquisition fee ($300-$1,000 upfront), early termination penalties (can be thousands), gap insurance requirements, and higher insurance premiums. Always read the lease agreement carefully and factor in these potential costs when comparing to buying.

How much does it cost to lease vs buy over 5 years?

For a $30,000 car over 5 years: Leasing typically costs $25,000-$30,000 (with nothing to show for it). Buying costs $32,000-$35,000 total, but you own a car worth $12,000-$15,000, making your net cost $17,000-$23,000. Buying saves $5,000-$10,000 over 5 years. However, leasing offers lower monthly payments ($300-$400 vs $500-$600) and includes warranty coverage.

What credit score do you need to lease vs buy a car?

Leasing typically requires a higher credit score (680+) to qualify for good rates, as lessors view it as riskier. Buying is more flexible: 660+ gets decent rates, 600-659 may qualify with higher rates, and even 500-599 can get subprime loans (though expensive). If your credit score is below 660, buying may be easier to finance than leasing.

Lease vs Buy Calculator - Compare Car Leasing & Buying Costs | AICalculator

Lease vs Buy: Making the Right Decision

Choosing between leasing and buying a car is a significant financial decision that affects your budget for years. Understanding the total costs, benefits, and drawbacks of each option helps you make an informed choice that aligns with your lifestyle and financial goals.

Cost Comparison Breakdown

Factor	Leasing	Buying
Monthly Payment	Lower ($300-$400)	Higher ($500-$600)
Down Payment	Lower ($0-$3,000)	Higher ($3,000-$6,000)
Ownership	No equity built	Build equity, own asset
Mileage	10,000-15,000/year limit	Unlimited
Maintenance	Covered by warranty	Your responsibility
End of Term	Return car, start over	Own car, no payments

When Leasing Makes Sense

✓ Low annual mileage: Drive less than 12,000 miles per year
✓ Want latest technology: Prefer new cars every 2-3 years
✓ Lower upfront costs: Need minimal down payment
✓ Business use: May qualify for tax deductions
✓ Warranty coverage: Want maintenance included
✓ Short-term need: Only need car for 2-4 years

When Buying Makes Sense

✓ High annual mileage: Drive more than 15,000 miles per year
✓ Long-term ownership: Plan to keep car 5+ years
✓ Build equity: Want to own an asset
✓ Customization: Want to modify your vehicle
✓ No restrictions: Don't want mileage or wear limits
✓ Lower total cost: Save money over 7+ years

Hidden Costs to Consider

Leasing Hidden Costs

• Acquisition fee: $300-$1,000
• Disposition fee: $300-$500
• Excess mileage: $0.15-$0.30/mile
• Wear and tear charges
• Early termination penalty
• Gap insurance requirement

Buying Hidden Costs

• Sales tax: 5-10% of price
• Registration fees: $50-$500/year
• Depreciation: 15-25% first year
• Maintenance after warranty
• Repair costs as car ages
• Resale hassle and costs

Financial Impact Over Time

Example: $30,000 vehicle over 10 years

Leasing (3 leases):

• Total payments: $42,000 (3 × $14,000)

• Equity at end: $0

Net cost: $42,000

Buying (one purchase):

• Total payments: $35,000

• Resale value after 10 years: $8,000

Net cost: $27,000

Buying saves: $15,000 over 10 years

Tax Implications

Business Use: If you use your vehicle for business, leasing may offer tax advantages. Lease payments are typically 100% deductible as a business expense, while buying only allows depreciation deductions (which are limited and spread over years). Consult a tax professional for your specific situation.

Personal Use: For personal use, there are no significant tax differences between leasing and buying. Sales tax applies to both (though calculated differently), and neither offers tax deductions for personal use.

Making Your Decision

The right choice depends on your personal situation. Use our calculator to compare actual costs based on your specific terms. Consider not just the monthly payment, but the total cost over the time you'll have the vehicle, including all fees, maintenance, and potential resale value.

As a general rule: if you plan to keep the car less than 4 years and drive under 12,000 miles annually, leasing may be more convenient. If you plan to keep it 5+ years or drive over 15,000 miles annually, buying will likely save you money in the long run.