Leasing vs. Buying a Car: Which Saves You More?

When you lease, you pay for the part of the car you use. When you buy, you pay to own all of it. A lease often has a lower payment, but you own nothing at the end. Buying costs more each month, but the payments end and the car is yours. In Q2 2026, Experian found 23.75% of new cars were leased.

AutoNetwork gives car education, not financial, tax or legal advice. AutoNetwork is not a lender.

Checked against the cited sources on October 30, 2026.

Rates, deals and tax rules change. Use real written quotes for your decision.

Short answer: When you lease, you pay for the part of the car you use. When you buy, you pay to own all of it. A lease often has a lower payment, but you own nothing at the end. Buying costs more each month, but the payments end and the car is yours. In Q2 2026, Experian found 23.75% of new cars were leased.

Sources: Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30); Experian — State of the Automotive Finance Market, Q2 2026 (https://us-preview.experian.com/content/dam/noindex/na/us/automotive/finance-trends/2026/experian-safm-q2-2026.pdf; checked 2026-10-30)

Check your own numbers

Roosevelt's Take

Personal advice from Roosevelt Gist, 40 years in the auto business. This is his experience, not a sourced fact.

The problem

The dealer asks, "What payment do you want?" A lease can hit that number fast. But the payment hides the money factor, the fees, the mileage limit and the bill at turn-in. Roosevelt has watched buyers pick a lease for the payment and pay more in the end. This guide shows you the real cost both ways.

Roosevelt's plan

  1. Know your miles and plans. How far do you drive each year? How long will you keep the car? That answers most of it.
  2. Get the numbers in writing. Ask for the price, money factor, residual and every fee for the lease. Ask for the price and APR for the loan.
  3. Compare the full cost. Use the free side-by-side check on this page. Same car, same years, same miles.

Sources: NerdWallet — Lease vs. buy questions (https://www.nerdwallet.com/auto-loans/learn/7-lease-vs-buy-questions-right; checked 2026-10-30); Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30)

1. Leasing vs. buying in plain words

A lease is like a long rental. You pay for how much value the car loses while you drive it, plus a rent charge, taxes and fees. At the end, you give it back or buy it.

A loan pays for the whole car plus interest. When you finish paying, you own it. You can keep driving it with no payment, or sell it.

Sources: Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30)

2. How a lease payment is built

Start with the price you agree on. This is the cap cost. Money down, trade-in value and rebates lower it.

The residual is what the car is expected to be worth at the end. You pay for the drop from the cap cost to the residual, split over the months.

The money factor sets the rent charge. Multiply it by 2,400 to get a rough interest rate. A money factor of 0.0025 is about 6%. The law makes the dealer show the rent charge in dollars, but not the money factor. So ask for it.

There may be a fee to start the lease and a fee to return the car. Compare both.

Example with round made-up numbers: a $40,000 cap cost and a $24,000 residual over 36 months. The value part is

Sources: Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30); Edmunds — Calculate your own lease payment (https://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); Federal Reserve — Ending a closed-end lease (https://www.federalreserve.gov/pubs/leasing/resource/consider/endclosed.htm; checked 2026-10-30)

Lease words to know

Lease forms use words most buyers never hear anywhere else. Here they are in plain words.

Acquisition fee
A fee to start the lease. It may be paid up front or added to the amount you finance. Ask for it in writing.
Adjusted cap cost
The car's price after money down, trade-in credit and rebates are taken off. Your payment is built from this number.
Buyout price (purchase option price)
The price to buy the car at the end of the lease, or early. It is listed in your lease form.
Cap cost (gross capitalized cost)
The price of the car in a lease, plus any fees or add-ons rolled in. You can negotiate it, just like a purchase price.
Cap cost reduction
Money down, trade-in value or rebates that lower the cap cost. If the car is totaled early, money down may be lost.
Closed-end lease
The most common consumer lease. You return the car at the end and do not owe for a lower-than-expected value, but you still pay for extra miles and wear.
Depreciation (in a lease)
The value the car is expected to lose while you drive it: cap cost minus residual value. It is the biggest part of your payment.
Disposition fee
A fee some leases charge when you turn the car in. Ask if it is waived when you lease or buy again.
Early termination
Ending the lease before the term is over. It can cost a lot. The lease form must explain how the charge is figured.
Excess mileage charge
What you pay for each mile over your limit when you turn the car in. Edmunds says 15 to 25 cents a mile is common.
Excess wear and use
Damage beyond normal use, like big dents, torn seats or bald tires. You may pay for it at turn-in.
GAP coverage (gap waiver)
Covers the gap between what you owe and what insurance pays if the car is stolen or totaled. Many leases already include it.
Lease term
How long the lease lasts, in months. The term is listed in your lease form.
Lessee and lessor
The lessee is you, the driver. The lessor owns the car, often a bank or the carmaker's finance company.
Lease transfer (lease takeover)
Handing your lease to another person. Some leasing companies allow it, some do not, and fees may apply.
Mileage allowance
How many miles a year the lease lets you drive without extra charges. Pick a number that fits how you really drive.
Money factor
A small number that sets the lease's rent charge. Multiply it by 2,400 for a rough interest rate.
Open-end lease
A lease where you may owe money if the car is worth less than expected at the end. Most often used for business.
One-pay lease
A lease paid all at once up front instead of monthly. It can lower the total rent charge.
Purchase option fee
A fee some leases add if you choose to buy the car. It is separate from the buyout price.
Regulation M disclosure
The federal lease form that must show your costs, like the amount due at signing, monthly payment and total of payments.
Rent charge
The finance part of your lease payment, like interest on a loan. It comes from the money factor.
Residual value
What the car is expected to be worth at the end of the lease. A higher residual usually means a lower payment.
Security deposit
Money some leases ask for up front and may give back at the end if you meet the terms.
Sign-and-drive (zero down)
A lease with little or nothing due at signing. The payment is often higher because nothing lowers the cap cost.
Total of payments
The total you will pay over the lease, shown in the lease form. Use it to compare deals, not just the monthly payment.

Sources: Federal Reserve — Up-front costs (https://www.federalreserve.gov/PUBS/Leasing/resource/consider/upfront.htm; checked 2026-10-30); Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30); eCFR — 12 CFR 1013.4, lease disclosures (https://www.ecfr.gov/current/title-12/chapter-X/part-1013/section-1013.4; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); CFPB — What can I negotiate when shopping for a car or auto loan? (https://www.consumerfinance.gov/ask-cfpb/what-things-can-i-negotiate-when-shopping-for-a-car-or-auto-loan-en-2132/; checked 2026-10-30); Federal Reserve — Gap coverage (https://www.federalreserve.gov/Pubs/Leasing/resource/different/gap.htm; checked 2026-10-30); Federal Reserve — Types of leases (https://www.federalreserve.gov/pubs/leasing/resource/introduction/type.htm; checked 2026-10-30); Edmunds — Calculate your own lease payment (https://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html; checked 2026-10-30); Federal Reserve — Ending a closed-end lease (https://www.federalreserve.gov/pubs/leasing/resource/consider/endclosed.htm; checked 2026-10-30); Edmunds — 10 steps to leasing a new car (https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html; checked 2026-10-30); Federal Reserve — Excess wear and use (https://www.federalreserve.gov/Pubs/Leasing/resource/different/wear.htm; checked 2026-10-30); CFPB — What is GAP insurance? (https://www.consumerfinance.gov/ask-cfpb/what-is-guaranteed-asset-protection-gap-insurance-en-797/; checked 2026-10-30); CFPB — Regulation M (Consumer Leasing), 12 CFR 1013 (https://www.consumerfinance.gov/rules-policy/regulations/1013/; checked 2026-10-30); Edmunds — 3 ways to turn your lease into cash (https://www.edmunds.com/car-leasing/3-ways-to-turn-your-lease-into-cash.html; checked 2026-10-30); IRS — Business use of a car FAQ (https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses-5; checked 2026-10-30)

3. Types of leases

Not every lease works the same way. Ask which kind you are signing.

Sources: Federal Reserve — Types of leases (https://www.federalreserve.gov/pubs/leasing/resource/introduction/type.htm; checked 2026-10-30); Federal Reserve — Up-front costs (https://www.federalreserve.gov/PUBS/Leasing/resource/consider/upfront.htm; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30); IRS — Business use of a car FAQ (https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses-5; checked 2026-10-30)

4. Who should lease, and who should not

Leasing fits some drivers well. Buying fits most people who keep cars a long time.

A lease may fit you if you drive about the same miles each year, take good care of your car, want a new car every few years, and like a warranty for most of the time you drive it.

Buying may fit you better if you drive a lot or your miles change, you keep cars for many years, you want to stop making payments someday, or you like to change your car.

Credit matters both ways. Advertised lease deals often need top credit. They are not a promise you will be approved.

Sources: NerdWallet — Lease vs. buy questions (https://www.nerdwallet.com/auto-loans/learn/7-lease-vs-buy-questions-right; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30)

5. Beware: mileage limits

Most leases allow 10,000, 12,000 or 15,000 miles a year. Edmunds says extra miles often cost 15 to 25 cents each. Your contract sets the real rate.

Be honest about how much you drive. Buying extra miles at the start often costs less than paying for them at the end. Ask if you get money back for miles you do not use.

At 20 cents a mile, going 6,000 miles over costs

Sources: Edmunds — 10 steps to leasing a new car (https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30)

6. Beware: excess wear and tear

Normal use is fine. Damage is not. You can be charged for dents, broken panels, torn or burned seats, worn tires, cracked glass, missing parts and bad repairs. The standards must be reasonable.

Ask for an inspection before you turn the car in. Read the report. Take photos. Fixing small things yourself may cost less than the lease bill.

Wear-and-tear plans are optional. Read what they leave out and how much they pay.

Sources: Federal Reserve — Excess wear and use (https://www.federalreserve.gov/Pubs/Leasing/resource/different/wear.htm; checked 2026-10-30); Federal Reserve — Ending a closed-end lease (https://www.federalreserve.gov/pubs/leasing/resource/consider/endclosed.htm; checked 2026-10-30); Edmunds — 10 steps to leasing a new car (https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html; checked 2026-10-30)

7. GAP coverage

If your car is stolen or totaled, insurance pays what it is worth. You may owe more than that. GAP covers the difference.

GAP is often already part of a lease. Check before you buy it again. GAP is usually not part of a loan. It does not give back your money down.

The CFPB says GAP is optional. Prices vary. Compare the dealer's price with your insurer and your bank or credit union. If you put GAP in a loan, you pay interest on it.

Sources: Federal Reserve — Gap coverage (https://www.federalreserve.gov/Pubs/Leasing/resource/different/gap.htm; checked 2026-10-30); CFPB — What is GAP insurance? (https://www.consumerfinance.gov/ask-cfpb/what-is-guaranteed-asset-protection-gap-insurance-en-797/; checked 2026-10-30); Progressive — Gap insurance through a dealership (https://www.progressive.com/answers/gap-insurance-through-dealership/; checked 2026-10-30)

8. Getting out early, buyouts and lease equity

Ending a lease early can cost a lot. The contract sets how it is figured. Get the payoff in writing first.

Many leases let you buy the car at the end, or sometimes before. Add taxes and fees, then compare to what the car sells for.

From 2021 to 2023, used car prices jumped. Some drivers had cars worth more than their buyout. That is not promised today. Some leasing companies limit selling to other dealers.

If you roll old loan debt into a lease, you pay it off in your monthly payments plus rent charges. Keep the full term, stay under the miles, and you hand it back and start over from zero. Read our Negative Equity guide.

Sources: Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); Edmunds — 3 ways to turn your lease into cash (https://www.edmunds.com/car-leasing/3-ways-to-turn-your-lease-into-cash.html; checked 2026-10-30); Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30)

9. Your rights: the lease form

Federal law, called Regulation M, says the dealer must give you a written form before you sign. You can keep it.

It must show what you pay at signing, your payments, the total of payments, other fees, how the payment is figured, early-ending costs, wear rules, who pays for upkeep and insurance, your option to buy, and taxes.

Older articles may say the FTC CARS Rule protects you. It does not. A federal court struck it down on January 27, 2025.

Sources: CFPB — Regulation M (Consumer Leasing), 12 CFR 1013 (https://www.consumerfinance.gov/rules-policy/regulations/1013/; checked 2026-10-30); eCFR — 12 CFR 1013.4, lease disclosures (https://www.ecfr.gov/current/title-12/chapter-X/part-1013/section-1013.4; checked 2026-10-30); U.S. Court of Appeals, Fifth Circuit — NADA v. FTC (vacating the CARS Rule) (https://www.ca5.uscourts.gov/opinions/pub/24/24-60013-CV0.pdf; checked 2026-10-30)

10. Leasing an EV

The federal EV credits ended for cars bought or leased after September 30, 2025. The IRS confirms this.

A dealer or carmaker discount on an EV lease is not a federal tax credit. Ask what it is and get it in writing.

Sources: IRS — Clean vehicle tax credits (https://www.irs.gov/clean-vehicle-tax-credits; checked 2026-10-30)

11. Today's numbers

Experian's Q2 2026 report is the newest we found.

Sources: Experian — State of the Automotive Finance Market, Q2 2026 (https://us-preview.experian.com/content/dam/noindex/na/us/automotive/finance-trends/2026/experian-safm-q2-2026.pdf; checked 2026-10-30)

12. Dealer traps

Talking only about the payment hides the price, the money factor and the fees.

Payment packing means adding extras you did not ask for into the payment. Ask for every line item.

A dealer can mark up the money factor. Ask for it, and compare it with other dealers. Get a loan pre-approval so you can compare buying too.

Sources: Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30); CFPB — What can I negotiate when shopping for a car or auto loan? (https://www.consumerfinance.gov/ask-cfpb/what-things-can-i-negotiate-when-shopping-for-a-car-or-auto-loan-en-2132/; checked 2026-10-30)

13. Credit union vs. bank or carmaker leases

Carmakers, banks and some credit unions all offer leases. Compare the money factor, fees, GAP and mileage rate from each.

You may hear that credit union leases have no sales tax. That is only true in some cases. Federal law exempts federal credit unions from many state taxes on their own purchases. Whether that lowers your lease tax depends on your state and who the tax falls on.

Some states give this only to federal credit unions, not state ones or banks. Louisiana says it does not apply when the car is leased to a customer. In Texas, tax is paid on the car's price when it is titled, not on your payments.

So ask for a written tax breakdown from each lender for your address. Do not assume a credit union lease is tax-free.

Sources: NCUA — Tax exemption of federal credit unions (legal opinion 94-0716) (https://ncua.gov/regulation-supervision/legal-opinions/1994/tax-exemption-federal-credit-unions; checked 2026-10-30); Michigan Treasury — RAB 1989-64, federal credit unions and sales tax (https://www.michigan.gov/treasury/reference/rab/content/1989/revenue-administrative-bulletin-1989-64; checked 2026-10-30); Louisiana OMV — Policy 49.06, credit union sales tax exemption (https://public.powerdms.com/ladpsc/documents/371007; checked 2026-10-30); Texas Comptroller — Motor vehicle leases (https://comptroller.texas.gov/taxes/publications/96-254/leases.php; checked 2026-10-30); Federal Reserve — Up-front costs (https://www.federalreserve.gov/PUBS/Leasing/resource/consider/upfront.htm; checked 2026-10-30)

14. How to compare the full cost

Use the same car, the same number of years and the same miles.

Lease cost: cash at signing plus all payments plus fees and turn-in charges.

Buy cost: money down plus all payments, minus what the car is worth at the end.

Quick check: the informal 1% rule. Divide the monthly lease payment by the sticker price. About 1% is a strong deal. Near 1.5% is a common upper limit. It is a rule of thumb, not a way to figure your payment. It does not count miles, money down or taxes.

Sources: Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30); NerdWallet — Lease vs. buy questions (https://www.nerdwallet.com/auto-loans/learn/7-lease-vs-buy-questions-right; checked 2026-10-30); Leasehackr — The one percent test (informal rule of thumb) (https://leasehackr.com/blog/2018/8/28/help-am-i-getting-a-good-deal; checked 2026-10-30)

Before you sign a lease

Sources: Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30); Federal Reserve — Gap coverage (https://www.federalreserve.gov/Pubs/Leasing/resource/different/gap.htm; checked 2026-10-30); Edmunds — Car leasing basics (https://help.edmunds.com/hc/en-us/articles/206102517-Looking-to-lease-Read-our-car-leasing-basics; checked 2026-10-30); eCFR — 12 CFR 1013.4, lease disclosures (https://www.ecfr.gov/current/title-12/chapter-X/part-1013/section-1013.4; checked 2026-10-30)

Check your own numbers

Open the calculator on AutoNetwork.com

What to say

Questions buyers ask

Is it cheaper to lease or buy?

Lease payments are often lower. Over many years, buying and keeping a car usually costs less because the payments end.

Sources: NerdWallet — Lease vs. buy questions (https://www.nerdwallet.com/auto-loans/learn/7-lease-vs-buy-questions-right; checked 2026-10-30); Experian — State of the Automotive Finance Market, Q2 2026 (https://us-preview.experian.com/content/dam/noindex/na/us/automotive/finance-trends/2026/experian-safm-q2-2026.pdf; checked 2026-10-30)

What is a money factor?

It sets the lease's rent charge. Multiply by 2,400 for a rough interest rate.

Sources: Edmunds — Calculate your own lease payment (https://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html; checked 2026-10-30)

What is a residual value?

What the car is expected to be worth at the end of the lease. It is set in your contract.

Sources: Federal Reserve — Keys to Vehicle Leasing: Lease payments (https://www.federalreserve.gov/Pubs/leasing/resource/different/payments.htm; checked 2026-10-30)

How much are extra miles?

Edmunds says often 15 to 25 cents a mile. Your contract sets the real rate.

Sources: Edmunds — 10 steps to leasing a new car (https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html; checked 2026-10-30)

Can I buy extra miles up front?

Often yes, and it can cost less than paying at the end. Ask if unused miles are refunded.

Sources: Edmunds — 10 steps to leasing a new car (https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html; checked 2026-10-30)

What counts as excess wear?

Damage beyond normal use, like dents, torn seats, worn tires and cracked glass.

Sources: Federal Reserve — Excess wear and use (https://www.federalreserve.gov/Pubs/Leasing/resource/different/wear.htm; checked 2026-10-30)

Do I need GAP on a lease?

It is often already included. Check before you buy it again.

Sources: Federal Reserve — Gap coverage (https://www.federalreserve.gov/Pubs/Leasing/resource/different/gap.htm; checked 2026-10-30)

Can I end a lease early?

Yes, but it can cost a lot. Get the payoff in writing first.

Sources: Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30)

Can I buy my car at the end of the lease?

Most leases give you that option. Compare the buyout plus taxes and fees with what the car is worth.

Sources: Federal Reserve — Keys to Vehicle Leasing: Questions and answers (https://www.federalreserve.gov/pubs/leasing/resource/faq.htm; checked 2026-10-30)

Is the 1% rule real?

It is an informal rule of thumb. A payment near 1% of the sticker price a month is strong. It ignores miles, money down and taxes.

Sources: Leasehackr — The one percent test (informal rule of thumb) (https://leasehackr.com/blog/2018/8/28/help-am-i-getting-a-good-deal; checked 2026-10-30)

Are credit union leases tax-free?

Not as a rule. It depends on your state and the lender. Ask for a written tax breakdown.

Sources: NCUA — Tax exemption of federal credit unions (legal opinion 94-0716) (https://ncua.gov/regulation-supervision/legal-opinions/1994/tax-exemption-federal-credit-unions; checked 2026-10-30); Louisiana OMV — Policy 49.06, credit union sales tax exemption (https://public.powerdms.com/ladpsc/documents/371007; checked 2026-10-30)

Can I still get the federal EV credit on a lease?

No. It ended for cars acquired after September 30, 2025.

Sources: IRS — Clean vehicle tax credits (https://www.irs.gov/clean-vehicle-tax-credits; checked 2026-10-30)

I'm a first-time buyer. Should I lease?

Only if your miles are steady and you understand the turn-in rules. Many first-time buyers do better with a short loan on a car they keep.

Sources: NerdWallet — Lease vs. buy questions (https://www.nerdwallet.com/auto-loans/learn/7-lease-vs-buy-questions-right; checked 2026-10-30)

Does the CARS Rule protect me?

No. A federal court struck it down on January 27, 2025.

Sources: U.S. Court of Appeals, Fifth Circuit — NADA v. FTC (vacating the CARS Rule) (https://www.ca5.uscourts.gov/opinions/pub/24/24-60013-CV0.pdf; checked 2026-10-30)

Pick by payment alone, and you may pay for miles, dents and fees you never saw coming.

Compare the full cost, and you choose the deal that fits your life and keeps more money in your pocket.

Next steps

Sources