What you are actually paying for
A lease charges you for depreciation over the lease term plus a finance charge — you rent the car's decline in value. A purchase charges you for the whole car, but you keep whatever value remains. Over three years the difference in cash out can be modest; over ten years, ownership is dramatically cheaper because payments eventually stop.
The break-even logic
Leasing tends to look good precisely over the period the manufacturer wants you to lease, then looks worse the moment you extend the comparison. If you are the kind of driver who keeps cars for eight to ten years, buying wins by a wide margin. If you replace your car every three years regardless, leasing may be genuinely competitive and is certainly simpler.
Where leasing genuinely fits
- You need a predictable, warranty-covered vehicle with no resale hassle.
- You can deduct the payment as a business expense.
- You drive predictably low mileage.
- You want to avoid the technology risk on rapidly changing vehicles, particularly EVs.
Where it goes wrong
High mileage drivers get hit at return. So do people who lease repeatedly — a perpetual payment with no asset at the end. And terminating a lease early is expensive and inflexible compared with simply selling a car you own.
Read three numbers on any lease
The capitalized cost (negotiable — this is the price), the residual value (what the bank says it will be worth at the end; a high residual lowers your payment) and the money factor (multiply by 2,400 to get the equivalent APR). If a dealer will not disclose all three, walk.