Lease vs Buy: Which Is Right for You in 2025?
The decision to lease or buy a car is one of the biggest financial choices you'll make when getting a new vehicle. Both options have distinct advantages depending on your lifestyle, driving habits, and financial goals. Our calculator above helps you compare actual numbers, but understanding the pros and cons is equally important.
Benefits of Leasing
- +Lower monthly payments - typically 30-40% less than financing
- +Drive a new car every 2-3 years with latest features and technology
- +Full warranty coverage for the entire lease term
- +No resale hassle - just return the car at lease end
- +Tax benefits for business use (payments may be deductible)
Benefits of Buying
- +Build equity over time - the car becomes an asset you own
- +No mileage restrictions - drive as much as you want
- +Full customization freedom - modifications, tinting, aftermarket parts
- +Lower total cost long-term - no payments once the loan is paid off
- +No wear and tear penalties - normal use is never a problem
5 Key Factors to Consider
1. How long do you keep cars?
If you trade in every 2-3 years anyway, leasing aligns with your behavior. If you drive cars for 7+ years, buying is almost always the better financial choice.
2. How many miles do you drive annually?
Leases cap mileage at 10,000-15,000 miles/year. High-mileage drivers pay significant overage fees ($0.15-$0.30/mile) making buying more economical.
3. Do you want to build equity?
Buying builds value you can use as a trade-in or sell later. Leasing gives you a new car but zero equity at the end of each term.
4. Is cash flow or wealth building more important?
Lower lease payments free up monthly cash for investing. However, buying creates a tangible asset that contributes to your net worth.
5. Do you use the car for business?
Business owners may be able to deduct lease payments as an operating expense, making leasing more tax-advantageous than buying.
Frequently Asked Questions
Is it better to lease or buy a car in 2025?▼
It depends on your situation. Leasing typically offers lower monthly payments and lets you drive a new car every few years, but you never build equity. Buying costs more monthly but you own the car and can sell it later. Over 6 years, buying usually saves $4,000-$10,000 after accounting for the car's residual value. Use our calculator above to compare costs for your specific situation.
How much cheaper is leasing vs buying each month?▼
Lease payments are typically 30-40% lower than finance payments. For a $45,000 vehicle, you might pay $450/month to lease versus $755/month to finance over 60 months. However, at the end of a lease you have nothing, while a financed car can be worth $15,000-$20,000 after 5 years.
What is the total cost of leasing vs buying over 6 years?▼
For a $45,000 car: Leasing costs about $36,000-$40,000 over 6 years (two 3-year leases) with $0 equity at the end. Buying costs about $50,000 total, but you own a car worth roughly $18,000, making the net cost around $32,000. Buying typically saves $4,000-$8,000 over this period.
What happens at the end of a car lease?▼
You have three options: (1) Return the car and walk away. (2) Buy the car at the pre-set residual value - this can be a great deal if the car is worth more. (3) Start a new lease on a different car. If you buy, you gain any equity between the residual and market value.
Can I negotiate a lease like a purchase?▼
Yes! The "cap cost" (capitalized cost) on a lease is negotiable just like the purchase price. Every dollar you negotiate off the cap cost reduces your monthly payment. You can also sometimes negotiate the money factor and get dealer incentives applied. Always negotiate the price before discussing lease terms.
Is leasing a car a waste of money?▼
Not necessarily. While you don't build equity, leasing provides predictable costs, full warranty coverage, and lower monthly payments. If you invest the monthly savings ($200-$300/month) in the stock market, the total cost difference narrows. Leasing makes sense for those who want a new car every few years and drive under 15,000 miles annually.
What credit score do I need to lease a car?▼
Most lease programs require a credit score of 680+ for the best rates. Scores of 700+ typically qualify for promotional money factors (0-3% APR equivalent). Some manufacturers offer subprime leasing for scores as low as 620, but with higher money factors that increase payments significantly.
How many miles can you drive on a lease?▼
Standard lease mileage allowances are 10,000, 12,000, or 15,000 miles per year. Exceeding your limit typically costs $0.15-$0.30 per mile at lease end. Going 5,000 miles over on a 36-month lease could cost $750-$1,500. If you drive a lot, buy higher mileage upfront (cheaper) or consider financing instead.
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