Is leasing or buying a car cheaper?

A lease payment is lower than a loan payment on the same car. That is not marketing — it is arithmetic, and it is true almost without exception.

A loan repays the whole car. A lease pays only for the part you use up. Same car, smaller number, because you are financing less of it.

Which is exactly why the lower payment is not a saving.

What a lease is actually charging you

Two components, and they are worth separating because they behave differently:

Depreciation. The difference between the car's price and what the leasing company expects it to be worth at the end, divided by the months. This is the part you are genuinely consuming.

The rent charge. Interest, essentially, quoted as a "money factor" — a small decimal rather than a percentage. Multiply the money factor by 2,400 to get the approximate APR. A money factor of 0.00250 is about 6%.

That conversion is worth memorizing. Money factors are not quoted as rates precisely because a small decimal does not look like a rate, and a great many lessees have never converted it.

Why buying usually wins over a long enough period

At the end of a lease you have nothing. At the end of a loan you have a car, and that car has years of use left in it that cost you no payments at all.

So the comparison depends entirely on the horizon:

• Over one lease term — three years, say — the costs are closer than people think, because the buyer has absorbed the steepest depreciation and has an asset worth less than they paid.
• Over six years — one purchase against two leases — buying pulls ahead clearly. The buyer's payments stop; the lessee's do not.
• Over a decade — it is not close. The buyer spends years with no car payment at all.

The lease versus buy calculator runs both paths over a horizon you choose, which is the only honest way to compare them, because the answer genuinely flips with the horizon.

The maintenance myth

The most common wrong argument for leasing is that a leased car is maintenance-free.

It is not. The factory warranty covers major repairs, and that is a real benefit worth counting. It does not cover:

• Tires, which on a three-year lease frequently need replacing before turn-in
• Brakes, same
• Routine servicing — oil, filters, inspections, all of which the lease requires you to keep up with
• Excess wear charges at turn-in — scratches, kerbed wheels, upholstery, anything beyond "normal"
• Excess mileage, charged per mile over the allowance

Where leasing genuinely makes sense

• You want a new car every three years regardless. If that is the plan, a lease is often the cheapest way to execute it, because you never hold the car into its expensive years.
• You need predictable costs and cannot absorb a surprise repair.
• Business use, where the tax treatment can differ meaningfully. Worth professional advice rather than a rule of thumb.
• The technology is moving fast and you would rather not own a car whose resale depends on where the market goes.

Where it does not

• You keep cars a long time. The lease structure charges you for the expensive years forever and never lets you reach the cheap ones.
• You drive a lot of miles. Mileage charges are steep and non-negotiable after the fact.
• You are hard on a car. Wear charges are assessed against a standard you do not set.
• You want the payment to stop. It never does.

What to ask

1. What is the money factor, and what is that as an APR? Multiply by 2,400.
2. What is the residual value? A higher residual means a lower payment and less depreciation charged to you.
3. What is the mileage allowance and the per-mile charge over it?
4. What is "excess wear" and who decides? Ask for the standard in writing.
5. What is the total of all payments, plus everything due at signing, plus likely turn-in charges? That is the real cost of the lease, and it is the only figure comparable to the buy path.

The payment comparison favours leasing and always will. The cost comparison favours buying, and by more the longer you look. Both are true, and which one you should act on depends on how long you intend to keep the car.

Sources: the money-factor conversion and the payment structure are set out in how a lease payment is calculated. Lease terms — mileage allowances, wear standards and turn-in charges — are set by each lessor and vary, which is why this guide asks for them in writing rather than quoting figures.