The dealer comparison most people see: "Lease for $399/month or buy for $649/month." Looks obvious. But that's the wrong frame. The lease ends in 36 months and you have nothing. The 60-month loan ends and you have a paid-off car worth ~$15,000-$20,000. The math has to run the full clock.
How this works
Three scenarios:
- Buy: down payment + (monthly payment × loan months) + maintenance after warranty − value at horizon.
- Lease: repeated leases over the horizon. Each cycle: down + (monthly × term) + disposition fee + any excess mileage. Then repeat with a new lease.
- Excess mileage: if your real mileage exceeds the lease allowance, that's an extra cost at every turn-in ($0.20/mile typical).
The math the dealer won't run: a 36-month lease at $399 with $3,000 down means your effective monthly cost is ~$483 — and at the end you have nothing. A 60-month purchase at $649 means your effective cost is ~$650 for 5 years, then $0 for the next 5 years, and at the end you have $8,500 of car. Over 10 years, the buyer paid less AND owns a vehicle.
The honest verdict logic
- ✅ Buy: long horizon, modest excess mileage, typical residual values. The default answer for most personal-use drivers.
- ⚠️ Depends: short horizon (under 6 years), high-residual brand, or you legitimately value the always-new-car experience.
- ✅ Lease: the rare case — business expense with full deduction, OR you genuinely turn the car over every 3 years regardless.
FAQ
Why is lease vs buy a long-horizon comparison?
Three-year lease vs three-year financed-purchase always favors the lease — you only pay for depreciation, not full ownership. The real comparison is leasing-forever vs buying-and-holding 8-12 years. Over that horizon, buying typically wins by tens of thousands.
When does leasing actually make sense?
When you genuinely want a new car every 3 years and accept that you're paying a premium for that. Or for a business expense where the lease payment is fully deductible. For most personal-use buyers, it's a worse deal in dollars but a better experience.
What about lease residual values?
The residual is the predicted value of the car at lease-end, set by the leasing company. The lease payment covers (MSRP − residual + interest + fees) ÷ months. Higher residuals = lower payments. Some makes (Toyota, Honda) have notably higher residuals.
Mileage limits — how much do they actually cost?
Typical excess-mileage charge: $0.15-$0.30/mile. If your real driving is 15k/year and you took a 12k/year lease, that's 9k extra miles over a 3-year lease = $1,350-$2,700 you owe at turn-in. The calculator includes this.
What's not in this calculator?
Maintenance differences (warranty covers most of the lease period; you pay all maintenance on a held-long buyer-side). Disposition fees ($300-$500 at lease end). Wear-and-tear charges. These all tilt slightly in favor of buying-and-holding.
What about buying out the lease at the end?
If the lease residual happens to be below market value (common when used-car prices spike), buying out the lease can be smart. But you can't reliably plan on that 3 years in advance.