HaatBeatBeyond the numbers
The maths shows one side. These are the things only you can weigh.
- Always a newer carLeasing makes it easy to drive a recent model with the latest safety features and few repairs.
- Freedom of ownershipAn owned car can be driven any distance, modified and sold when you choose. A lease has rules.
- Predictable costsLeases with servicing included make monthly costs steady, which some households value.
- Ending early is costlyLeaving a lease early can mean large charges. Make sure the term fits your plans.
- A car is not an investmentEither way the car loses value. The question is how much, and who carries that loss.
How it's calculated
Both households spend the same each month, so only the choice differs. At the end of the lease the leased car goes back; the bought car is worth its price less the yearly fall in value.
Assumptions
- The car is bought outright; with a loan, see the car cash or loan page.
- Insurance, servicing and taxes cost the same either way, unless the lease includes them (then subtract them from the lease payment).
- The car's value falls by a steady yearly rate; real resale prices vary.
- Money not spent is saved at a steady return.
Worked example
A 35,000 dollar car losing 15% a year, against a 36-month lease at 450 dollars a month with 3,000 dollars upfront and 500 dollars of return fees, with savings at 5%: buying ends about 2,266 dollars ahead, with a car worth about 21,494 dollars. In India, a 10 lakh rupee car against an 18,000 rupee monthly subscription over 36 months, with savings at 8%, leaves buying about 83,528 rupees ahead.
Questions
Why can leasing look cheaper month to month but cost more overall?
Lease payments cover the value the car loses plus the lessor's costs and profit. At the end you own nothing, while a buyer still has the car.
When does leasing make sense in the numbers?
When the car loses value quickly, the lease is priced keenly, or you would otherwise replace the car every few years anyway.
What about a car subscription that includes insurance and servicing?
Subtract what you would pay for those as a buyer from the monthly amount, so both sides cover the same things.
What happens if I drive more than the lease allows?
Excess distance is charged when the car goes back. Include an estimate in the fees.