Car Loan vs Lease: Which Is Cheaper?
Compare the real costs of buying vs leasing a car to make the best financial decision for your situation.
Key Differences
| Factor | Buying | Leasing |
|---|---|---|
| Ownership | ✅ You own the car once the loan is paid off | ❌ You never own the car |
| Monthly Payment | Higher, but builds equity | Lower, but no equity |
| Mileage Limits | ✅ Unlimited | ❌ Usually 10,000–15,000 miles/year |
| Wear & Tear Fees | ✅ None | ❌ Charged at lease end |
| Flexibility | ✅ Can sell anytime | ❌ Must return at lease end |
When Leasing Makes Sense
Love New Cars
You enjoy driving new cars every 2–3 years
Low Mileage
You drive under 12,000 miles/year
Lower Payments
Want lower monthly payments and warranty coverage
Business Use
You write off business use on taxes
When Buying Makes Sense
Long-term Ownership
You plan to keep the car 5+ years
High Mileage
You drive a lot (15,000+ miles/year)
Build Equity
Want to build equity and eventually drive payment-free
Customization
You prefer modifying your vehicle
Example: $30,000 Car
| Scenario | Monthly Payment | Total Cost After 3 Years |
|---|---|---|
| Loan (60 months @ 6% APR) | $580 | $20,880 (still owe balance) |
| Lease (36 months) | $350 | $12,600 (no ownership) |
💡 Bottom Line
Leasing: Best for flexibility and lower upfront costs. Buying: Best for long-term savings and full ownership.
Use our Lease vs Buy Calculator to see which fits your budget best.
Frequently Asked Questions
Is leasing always more expensive than buying?
Not necessarily. Leasing can be cheaper in the short term due to lower monthly payments, but you don't build equity. Buying is typically cheaper long-term if you keep the car for 5+ years.
What happens if I exceed my lease mileage?
You'll pay a per-mile penalty, typically $0.15-$0.25 per mile over your limit. This can add hundreds or thousands to your lease-end costs.
About AFC Team
AFC Team provides educational content about auto financing. Our calculators and guides are for informational purposes only and should not be considered financial advice. Always consult with qualified financial professionals for important financial decisions.