Leasing vs Buying: When Each Option Makes Sense

The internet will tell you that leasing is "throwing money away" and that you should always buy your cars. The internet is also full of people who financed $75,000 trucks on 84-month loans and are upside down on day one. Both tribes have strong opinions and weak math. The truth about leasing versus buying is that each one wins in specific situations, loses in specific situations, and the right answer depends on exactly how you use a car and how long you keep it. Let me run you through six scenarios I have actually dealt with for myself and for friends, with real numbers.

Before the scenarios, the foundational concept. When you finance a car, you pay for 100 percent of the depreciation, the interest on the entire value, and you keep the equity at the end. When you lease a car, you pay only for the depreciation during the lease term plus interest on the depreciating value, and you have no equity at the end. The only question that matters is how much the car depreciates while you own it.

Scenario 1: The 36-Month German Sedan

BMW 3 Series, Audi A4, Mercedes C-Class. These cars depreciate hard in the first three years. A $55,000 BMW 330i xDrive is worth about $32,000 after three years and 36,000 miles, assuming clean condition and normal wear. That is $23,000 of depreciation, $638 per month for the ownership period.

A typical lease on the same car runs about $550 per month plus a $3,500 down payment. Over 36 months that is $23,300 total out of pocket. You return the car with nothing owed. Tires, routine maintenance, and scheduled service were all included in the lease.

If you had financed the same car with 20 percent down and a 72-month loan at 7.5 percent interest, your payment would be about $760 per month. Over 36 months you paid $27,360 plus the $11,000 down payment. You now own a car worth $32,000 but you still owe about $31,000 on the loan. Your equity is approximately $1,000 after three years of $38,000 in total payments.

The lease is the clear winner for the three-year German sedan scenario. It saves money, it has no end-of-term hassle, and the car is under warranty the entire time. This is exactly why German dealers push leases so hard. The subsidized residual values in their captive finance programs make leasing cheaper than buying for most customers.

Scenario 2: The 10-Year Japanese Sedan

Honda Accord or Toyota Camry at $32,000 new. Total depreciation over ten years is about $20,000 to $22,000 depending on condition, so you lose roughly $2,100 per year on average. That is dramatically less than the German sedan.

Financing at 6.5 percent over 60 months costs you $627 per month for five years. After five years you own the car outright and drive it for five more years at roughly $180 per month in maintenance, tires, and insurance. Your total cost of ownership over ten years is about $46,000 all-in.

Leasing three Accords back to back over ten years, at $350 per month plus $2,000 down each lease, costs you $48,000 in lease payments plus $6,000 in down payments, for $54,000 in total. Plus you end up with nothing at the end of ten years.

Buying wins in this scenario by about $8,000 over a decade, and it wins by more if you keep the car longer than ten years. The Japanese sedan is exactly the car you should buy and keep, because its depreciation curve flattens out after year five and the incremental cost of ownership gets very cheap.

Scenario 3: The Full-Size American Truck

Ford F-150 Lariat at $68,000. These depreciate slowly because demand for used trucks in good condition is strong and production has been supply-constrained for years. After five years and 75,000 miles, a clean F-150 Lariat is worth about $42,000.

Financing at 7 percent over 72 months costs you $1,160 per month. After five years you have paid $69,600 in payments and owe about $11,000 still on the loan. Net equity is about $31,000.

Leasing the same truck for three years at $740 per month plus $4,000 down costs $30,640 total out of pocket. You return the truck with no equity. If you lease two trucks back to back over six years, your total cost is about $61,000 and you still have nothing at the end.

Buying the truck and keeping it for the seven-year lifespan most people keep trucks turns out to be the winning move by a significant margin. The key factor is that trucks hold their value better than most vehicles, which rewards ownership. For the typical truck buyer who plans to keep the truck until it has 150,000 miles, buying is almost always the correct answer.

Scenario 4: The High-End Performance Car

Porsche 911 Carrera at $130,000, kept for three years and 20,000 miles. Residual value after three years is strong on 911s, usually around 70 to 75 percent of MSRP with low miles, which is exceptional.

Leasing a new 911 at current factory rates runs about $1,500 per month plus $12,000 down. Over 36 months that is $66,000 out of pocket. You return the car and start fresh on a new model.

Financing the same 911 at 6 percent for 60 months costs $2,515 per month. After three years you have paid $90,540 and you still owe about $65,000 on the loan. The car is worth about $94,000 at that point. Your equity is $29,000.

Here the math is more interesting. You have spent $66,000 leasing or $90,540 financing, but with financing you retain $29,000 in equity. Net cost of financing is $61,540, which beats leasing by about $5,000 on the full math. The catch is the capital tied up in payments during those three years, which could have been invested elsewhere.

For Porsche and similar strong-residual performance brands, financing and selling at the right time can beat leasing, but only if you are disciplined about timing the sale. If you are the kind of person who will lease another one at the end of the term anyway, leasing is probably the less-stressful option.

Scenario 5: The Electric Vehicle in a Changing Market

Tesla Model Y at $48,000, or a comparable Hyundai Ioniq 5 or Kia EV6. EVs in 2026 are depreciating faster than ICE vehicles of similar price, partly because battery technology keeps improving and partly because federal tax credits have been restructured. A three-year-old Model Y with 40,000 miles is worth about $26,000, which is a 46 percent depreciation.

Leasing a new EV gives you access to the federal tax credit directly on the capitalized cost, which most buyers cannot access if they finance because of income limitations or purchase structure. The effective lease price on a Model Y is typically $380 to $450 per month with moderate down payment.

Financing the same car and taking the tax credit separately, if you qualify, costs about $730 per month with 20 percent down. After three years you have $29,000 in payments and owe $22,000 on the loan. Car is worth $26,000. Equity is $4,000.

For EVs, leasing almost always wins in 2026 because of the tax credit advantage plus the fast depreciation. This is expected to shift as battery technology stabilizes, but for the next three years leasing an EV makes more sense than buying one for most households.

Scenario 6: The Long-Term Used Car

The best financial move with cars is to buy a lightly used vehicle, typically 3 to 4 years old, and keep it for 8 to 10 years. You skip the worst depreciation, you pay cash or finance a shorter loan, and you get the lowest cost per mile of any ownership strategy.

A 2023 Toyota Camry with 35,000 miles purchased for $22,000 in 2026 and kept until 2034 costs the buyer roughly $4,500 per year all-in including financing, maintenance, and eventual disposal. That is dramatically cheaper than any leasing strategy on a new car of similar utility.

The reason people do not do this more often is that the used car market requires more patience and more diligence, and the monthly payments on an 8-year-old car with 60,000 miles are harder to qualify for than the subsidized lease on a new car. But for households that have the cash flow to buy outright or the credit to finance a used vehicle well, the long-term used car strategy wins on almost every metric.

The short answer across all these scenarios. Lease expensive European cars for three years. Buy Japanese sedans and keep them. Buy American trucks and keep them. Lease EVs in 2026. Never finance a car on an 84-month loan, which is the scenario none of the math above covers but which is becoming the default for people trying to stretch into cars they cannot actually afford. The right answer always comes from the actual depreciation curve of the specific car, not from ideology about leasing versus buying.