The 3-Year Comparison

Three years is the most common lease term. Here is how buying and leasing compare on a typical $35,000 car.

Buying (3 years)

$35,000 car, $5,000 down, 7.5% APR, 60-month loan

Down payment$5,000
36 months x $600/mo$21,600
Total paid out$26,600
Car value remaining+$20,000 (est.)
Net cost$6,600

You still own the car. It has value.

Leasing (3 years)

Same $35,000 car, $450/mo lease, 36-month term, 12k miles/yr

36 months x $450/mo$16,200
Mileage overage$0 (if under limit)
Disposition fee$400
Total paid out$16,600
Car value remaining$0 (no equity)

Car goes back. Nothing to show for it.

3-year verdict

Leasing looks cheaper at 3 years ($16,600 vs $26,600 paid out). But buying leaves you with a $20,000 car. Net cost of buying: $6,600. Net cost of leasing: $16,600. Buying wins even at 3 years when you factor in equity.

The only time leasing wins at 3 years: when you immediately start another lease at the same low payment, always stay under the mileage limit, and truly value the new-car experience. If you go over mileage or face wear charges, the lease number gets worse fast.

5+ year picture

At 5 years, buying dominates. The loan is nearly paid off (or paid off if you had a 60-month term), the car still has value, and your monthly payment is $0. A lease customer has paid 60 months of lease payments, returned two cars, paid two disposition fees, and has nothing to show. The buying advantage compounds over time.