Leasing vs Buying
Leasing is renting with a mileage limit and a condition standard. That is not an argument against it, but it is what you are comparing, and payment against payment is the wrong comparison.
What a Lease Actually Is
You pay for the depreciation the car experiences while you have it, plus a finance charge, plus fees. At the end you hand it back and own nothing, or you buy it at a price agreed at the start.
That is why lease payments are lower than loan payments on the same car: you are paying for a slice of the car rather than all of it. Comparing the two payments directly tells you almost nothing, because they are buying different things.
Over a fixed period, say six years, add up everything. Leasing: all payments, the initial amount, fees, plus a second lease after the first ends. Buying: all payments plus the initial amount, minus what the car is worth at the end, which you still own. Buying almost always wins over a long enough horizon, because eventually you have payments of zero.
The Limits That Cost Money
- Mileage. Leases set an annual allowance and charge per mile over it. A long commute can make leasing expensive in a way the payment never hinted at. Estimate honestly rather than optimistically.
- Condition. Wear beyond "normal" is charged at return, and the definition is the lessor’s. Kerbed wheels, upholstery damage and worn tyres are the usual charges.
- Ending early is expensive. Leases are difficult and costly to exit. If your circumstances might change, that inflexibility is a real cost.
- Modifications are generally not allowed.
When Leasing Is Defensible
It is not always the worse choice, whatever the standard advice says.
- You genuinely want a new car every few years and accept paying for that preference.
- Low, predictable mileage.
- You want a warranty covering the entire period with no repair risk.
- Business use where the tax treatment favours it, which is worth asking an accountant about rather than assuming.
When It Is Not
- High mileage.
- You keep cars a long time. This is where buying wins by the largest margin.
- The payment is the only reason it looks attractive. Leasing to afford a car you could not otherwise afford means permanent payments on a car you will never own.
- Your situation might change in the next few years.
The real cost of leasing is not any single agreement, it is the pattern. Lease, return, lease again means a car payment for the rest of your life. Buying and keeping a car for several years after it is paid off is where the money is, and those payment-free years are the entire financial argument for buying.
If You Do Lease
Negotiate the price of the car first, exactly as if buying, because the lease is calculated from it. Ask what the vehicle is assumed to be worth at the end and what the finance charge is; both are negotiable and both are usually presented as fixed.
Put down as little as the agreement sensibly allows. A large upfront payment on a lease is money you lose entirely if the car is written off early, because the insurance settles with the lessor rather than refunding you.
And get gap cover. It is included in many leases, and where it is not, a total loss part-way through is exactly the situation it exists for.