Should I Lease or Buy a Car? A Worked Example
A step-by-step worked example comparing the net cost of leasing versus buying a car over a 3-year period.
Rather than relying on a rule of thumb, here's exactly how the net-cost math plays out for a common scenario — a $35,000 car, financed or leased, held for 3 years.
Worked example
| Buying | Leasing | |
|---|---|---|
| Upfront | $3,000 down payment | $2,500 due at signing |
| Monthly payment | $633.64 (7% APR, 5-year loan) | $400 |
| Total paid over 3 years | $25,811 | $16,900 |
| Resale value / ownership at end | $19,250 resale − $14,152 loan balance | $0 (car returned) |
| Net cost | $20,713 | $16,900 |
In this specific example, leasing costs about $3,813 less over 3 years — largely because the loan is only 40% paid off (5-year term, 3-year comparison), leaving a substantial remaining balance that offsets the resale value.
How the answer changes with different inputs
Extend the same scenario to 6 years and the loan is fully paid off with two years of zero-payment ownership left — buying typically wins by a wide margin at that point. Shorten the loan term instead, and the loan balance at year 3 shrinks, narrowing leasing's advantage. Try your own numbers in the Car Lease vs. Buy Calculator to see exactly where the crossover point falls for your situation.