Lease vs Buy a Car
The Real Math

For most people, buying is smarter financially because you build equity and eventually drive payment-free. The math is clear: over 10 years, buying a Toyota Camry costs roughly $38,000 total while leasing the same car costs $50,400+ and you never own anything. Leasing only makes sense if you are self-employed (tax deduction), always want a new car every 3 years, or drive fewer than 12,000 miles per year.

Lease payments are lower because you are only paying for the car's depreciation during the lease term, not the full purchase price. On a $30,000 car that depreciates to $18,000 over 3 years, your lease payments cover that $12,000 difference plus interest (the money factor). A loan payment covers the entire $30,000 plus interest. Lower payment does not mean cheaper overall.

You pay an excess mileage charge, typically $0.15 to $0.25 per mile. If your lease allows 12,000 miles per year and you drive 15,000, that is 9,000 excess miles over a 3-year lease, which costs $1,350 to $2,250 at turn-in. Some dealers will negotiate this away if you lease another car from them, but you are still paying for it in the next deal.

Financially, leasing is the most expensive way to operate a vehicle over time because you are always making payments and never build equity. However, calling it a waste depends on what you value. If you want a new car every 3 years with warranty coverage and predictable costs, and you can afford it, leasing delivers that. Just understand you are paying a premium for that convenience.

Buy a 1-3 year old certified pre-owned (CPO) vehicle. Someone else absorbs the 20-30% first-year depreciation, you still get a manufacturer warranty, and the car is mechanically identical to new. Finance for no more than 48-60 months, put 20% down, and keep the car for 8-10 years. This is the strategy that minimizes total cost of ownership.

Yes. You can negotiate the capitalized cost (the price of the car), the money factor (interest rate), and dealer fees. The most important number is the cap cost because every dollar off the price directly reduces your monthly payment. Never focus only on monthly payment as dealers stretch terms to hide bad deals.

The average new car payment in 2026 is approximately $726 per month, and the average used car payment is around $525 per month. The average loan term has stretched to 68 months for new cars and 72 months for used. These numbers are historically high and reflect the fact that cars have become significantly more expensive while wages have not kept pace.

This is the theoretical argument for leasing: lease for $350/month instead of buying for $550/month, and invest the $200 difference. In theory, at 8% returns over 10 years, that $200/month becomes roughly $36,000. But in practice, almost nobody actually invests the difference. They spend it. If you have the discipline to truly invest every single month, the math can work. But be honest with yourself.