The $400 Lease Looked $1,400 Cheaper Than Buying — Until I Counted My Commute Miles
The dealer's screen said $400 a month to lease, against $594 a month to buy the same $35,000 car. That's $194 a month of difference, and my brain did the easy sum: lease wins, sign here. Then my brother-in-law asked one question over dinner: "How many miles is the lease for?" I did my commute maths on a napkin. I drive about 15,000 miles a year, and the lease allowed 12,000. The "cheap" lease was about to get a lot less cheap.
This post is for anyone shopping for a car in the autumn model-year clearance season who wants to compare a lease and a purchase honestly. You'll learn which costs the monthly payment hides, see a full worked example in dollars (with pounds and euros noted), and know when to use a lease vs buy calculator.
⚠️ Disclaimer
This article is for informational purposes only and does not constitute financial advice. Prices, rates, fees and resale values are illustrative and vary by dealer, region and vehicle. Always consult a qualified professional for your specific situation.
Why Is the Monthly Payment the Wrong Comparison?
A lease payment and a loan payment aren't buying the same thing. When you lease, you pay for the car's depreciation during the term plus a finance charge. When you buy, you pay for the whole car and then own whatever is left. So a lower lease payment doesn't tell you the lease is cheaper, only that you're paying for less of the car.
A lease vs buy comparison is a total-cost calculation that adds every dollar you spend over the same period (down payment, fees, taxes, monthly payments and end-of-term costs) and subtracts what you still own at the end, such as the car's resale value. Whichever has the lower net figure is cheaper.
Here's what gets left out of the sticker conversation:
| Cost | Lease | Buy |
|---|---|---|
| Up-front | Down payment + acquisition fee | Down payment + sales tax |
| Monthly | Lease payment (+ tax) | Loan payment |
| End of term | Disposition fee, excess miles | Pay off balance, sell or keep |
| You own at end | Nothing | The car (resale value) |
How Do You Calculate Lease vs Buy Total Cost?
Let's run my exact scenario over a 36-month window. The same logic applies whether the price is $35,000, £28,000 or €32,000; only the tax rate changes (7% here, 20% VAT in the UK).
The lease: $400 a month for 36 months, $2,000 down, $895 acquisition fee, $395 disposition fee at the end, 7% sales tax on payments.
The purchase: $35,000 car, $5,000 down, $30,000 loan at 7% APR over 60 months, 7% sales tax on the price, expected resale after 36 months of $22,000.
First the loan payment, using the standard amortization formula:
With P = $30,000, r = 0.07 ÷ 12 and n = 60, that gives $594.04 a month. After 36 payments the remaining loan balance is about $13,268, which you'd clear when you sell.
| Item | Lease (36 mo) | Buy (36 mo) |
|---|---|---|
| Down payment | $2,000 | $5,000 |
| Fees / sales tax | $1,290 | $2,450 |
| Monthly payments | $15,408 | $21,385 |
| Loan payoff | — | $13,268 |
| Resale value | — | −$22,000 |
| Net cost | $18,698 | $20,103 |
The lease payments include 7% tax: $400 × 1.07 × 36 = $15,408. The lease fees are the $895 acquisition and $395 disposition fees.
On paper the lease is about $1,405 cheaper over three years. That's the number I almost signed on. But the resale value is an assumption. If the car is worth $25,000 instead of $22,000, buying wins outright. Treat it as a range, and plug a pessimistic and an optimistic value into the calculator.
Key Takeaway
Compare the same time window and include everything: fees, tax, payoff and resale. A $194 monthly gap shrank to roughly $39 a month once ownership value was counted.
What Happens When You Go Over Your Mileage Cap?
Most U.S. leases allow 10,000 to 15,000 miles a year, and the Consumer Financial Protection Bureau notes that excess-mileage charges commonly run from about 15 to 30 cents per mile. In my contract it was 25 cents.
Now apply my real driving: 15,000 miles a year against a 12,000 cap.
That's 3,000 extra miles × 3 years = 9,000 miles × $0.25 = $2,250 due at lease end.
| Annual Miles | Excess Charge | Lease Net Cost | vs Buy ($20,103) |
|---|---|---|---|
| 12,000 | $0 | $18,698 | Lease cheaper by $1,405 |
| 15,000 | $2,250 | $20,948 | Buy cheaper by $845 |
| 18,000 | $4,500 | $23,198 | Buy cheaper by $3,095 |
That's the whole story in one table. At 12,000 miles the lease wins; at 15,000 the advantage reverses. The mileage cap alone swung the decision by more than $2,000.
⚠️ Note
Leases also charge for "excess wear and tear" at return, such as tyre tread, dents and interior damage. Ask for the wear standard in writing before signing, since it isn't part of the monthly payment you're quoted.
So Which Is Actually Better for You?
There's no universal winner. Leasing tends to suit people who:
- Drive reliably under the mileage cap (a short commute or a second car)
- Want a new car every 2–3 years with warranty coverage throughout
- Can use the lease as a business expense (check with a tax professional)
Buying tends to suit people who:
- Drive more than 12,000–15,000 miles a year
- Keep cars for 6+ years, when the loan is long paid off and payments are zero
- Want freedom to modify, sell or hand the car down without contract penalties
The money factor is the finance charge on a lease, expressed as a small decimal such as 0.00292. Multiply it by 2,400 to get an approximate APR (0.00292 × 2,400 ≈ 7.0%). Dealers often quote the money factor, not an APR, so converting it lets you compare it directly with a loan rate.
💡 Pro Tip
Before visiting a dealer, check your real annual mileage from your last two service records or your odometer photos. Then run lease and buy numbers side by side. Doing it before you're in the finance office keeps the monthly-payment pitch from steering you.
If you do buy, how long you finance matters as much as lease vs buy itself. See how longer terms add interest in our auto loan calculator, and check that the payment fits your budget with the debt-to-income calculator. If you're also weighing how fast the car loses value, the depreciation calculator gives a resale estimate, and the loan calculator handles any other financing.
Frequently Asked Questions
Is it cheaper to lease or buy a car?
It depends on mileage, how long you keep the car and its resale value. In the example above, leasing was about $1,400 cheaper at 12,000 miles a year but about $845 more expensive at 15,000 miles a year.
What is a good lease mileage allowance?
Choose the allowance that matches your real driving, plus a small buffer. Buying extra miles up front is usually cheaper per mile than paying the excess charge at the end, so ask the dealer for both prices.
Can I end a car lease early?
Usually yes, but it can be costly. Early termination often requires paying the remaining payments or the gap between what you owe and the car's value. Read the termination clause before you sign.
Does a bigger down payment make a lease better?
Rarely. Money put down on a lease is gone if the car is stolen or written off early, and you get no equity back. Many advisers suggest keeping lease down payments small.
How do I convert a money factor to an APR?
Multiply the money factor by 2,400. A money factor of 0.0025 is roughly a 6% APR. This is an approximation, but it's close enough to compare against a loan rate.
Try It Yourself
The monthly payment is the headline, but the total cost over the same period is the truth. Enter your own price, fees, mileage and expected resale value into the Lease vs Buy Car Calculator and see which option comes out ahead for the way you actually drive. Then pressure-test the buying side with the auto loan calculator before you walk into the dealership.
