Is leasing ever cheaper? Two lease cycles vs. one loan over six years

By DecisionSheet · Updated September 22, 2026 · 2026 tax figures

Leasing costs less cash in this comparison, and buying ends with more wealth. Both statements come from the same run of DecisionSheet's lease-vs-buy model, and the gap between them is the car.

The case is the calculator's default: a $42,000 car, bought with $5,000 down and a 60-month loan at 5.9%, or leased for $480 a month with $3,000 due at signing, a 36-month term and a $400 disposition fee (the charge for returning the car at the end of a lease). The model follows both paths for 6 years: one loan, paid off in year five, against 2 back-to-back leases. After 6 years the buyer is $1,211 ahead (open this scenario).

What each path owns at the end

The buyer finances the price plus 7% sales tax ($2,940) less the down payment: $39,940 at 5.9%, or $770.30 a month for 60 months. After the last payment the buyer keeps the car. The model values it by taking the 15% annual depreciation input off its value every year, spread across the months so that each twelve-month stretch removes exactly that share. At year 6 the car is worth $15,840, 38% of its price, and the buyer owns all of it.

The lessee owns no car at the end, only a portfolio. Each month the model compares the two paths' payments, and whichever side paid less invests the difference at the 7% return assumption. That return is an assumption, not a forecast.

• The lessee invests the $2,000 difference in down payments on day one, then $290.30 a month (the loan payment less the lease payment) through the loan's 60 months, except months 36 and 37, when the first lease is returned and the second signed. Before growth that is $18,837; with growth, it is $24,407 at year 6.
• The buyer invests $2,819 across months 36 and 37, when the first lease's return fee and the second lease's signing each cost the lessee more than a loan payment; then $480 a month for the 12 months after the loan is paid off, plus the second return fee in the last month. Before growth that is $8,979; with growth, $9,778.

So the buyer ends with $15,840 of car and $9,778 of portfolio, $25,618 in all, and the lessee with $24,407. The lessee's portfolio is $14,629 larger; the car more than covers it.

Total outflows vs. net wealth

The calculator's two totals point in opposite directions.

Outflows are the cash each side hands over. The buyer pays $5,000 down and 60 loan payments: $51,218. The lessee pays 2 down payments ($6,000), 72 lease payments ($34,560) and a $400 disposition fee at each return: $41,360. Leasing costs $9,858 less cash.

Net wealth is what each side holds at the end: car equity plus portfolio for the buyer, portfolio alone for the lessee. Here buying leads by $1,211. The calculator's tile labels this lead "Buying ends ahead": a lead in net wealth, not in cash paid out.

At a 0% return the two reconcile: the buyer's lead is the car's value less the extra cash the buyer paid, $15,840 less $9,858, which the model reports as $5,983. At 7% the lead is $4,772 smaller. The lessee invests more ($18,837 against $8,979) and invests all of it in the first five years, while most of the buyer's arrives in year six, so the return adds more to the lessee's side.

A lessee partway through a contract still owes the payments left on it, and the model deducts them from the lessee's wealth in every year's figures, as it deducts the buyer's unpaid loan. At year one, with $11,520 of payments still owed, the buyer leads by $8,622. At year three, when the first lease is returned and nothing is owed, the lessee leads by $5,209. A year into the second lease, with $11,520 owed, the buyer leads by $9,531; at year five, with $5,760 owed, by $4,796. Each year's figure is the result of a comparison that ends that year (the five-year one). The zigzag in the chart is that deduction: the lessee's line is pulled down while a lease is under way and recovers at each return.

Which input flips the answer

Each input below was moved on its own until the buyer's lead reached zero. The table is sorted by how far each input had to move, as a percentage of its default.

Of the lease payment, depreciation and the investment return, the lease payment is the most sensitive: $14 a month off the lease is enough. Depreciation comes second and the return third. One scenario past each break-even, each a lease win outside the $1,000 tie band:

• Lease payment $440: leasing ahead by $2,331 (open this scenario).
• Depreciation 19%: leasing ahead by $2,767 (open this scenario).
• Return 11%: leasing ahead by $2,114 (open this scenario).

The vehicle price needs the smallest change of all, but only because the model takes the lease payment as a separate input: raising the price alone makes only the buy side dearer.

The disposition fee cannot flip this comparison. It is money the lessee pays and the buyer does not, so a larger fee widens the buyer's lead: at $2,000 it is $4,771.

Assumptions and limits

• Mileage limits and wear charges are not modeled. The lease carries no mileage allowance and no charge for excess miles or wear at return. The Federal Trade Commission notes that exceeding a lease's annual mileage limit will probably bring an additional fee, and that lessees are responsible for excess wear and damage.
• Insurance, maintenance and registration are not modeled on either side. The FTC notes a lease requires insurance meeting the leasing company's standards.
• Tax treatment. The buyer pays 7% sales tax on the price, financed in the loan. Any tax on lease payments has to be inside the $480 entered; the model adds none. Investment gains are untaxed.
• Residual value. The model has no residual value for the lease, meaning the end-of-lease value a lessor uses to set the payment; the lease payment is entered directly. The buyer's car is valued at its depreciated price with no cost of selling it, and a single depreciation rate applies every year.
• Negative equity counts. Where the loan exceeds the car's value, the buyer's equity is negative and lowers net wealth. In every scenario here the car is worth more than the loan in every year.
• The tie. The model reports a final gap within $1,000 as a tie, and the calculator shows it as one. None of the linked scenarios is a tie.
• Lease payments still owed. The deduction for a lease in progress, described above, is undiscounted, and the disposition fee of a lease still in progress at the horizon is not deducted. This is a wealth comparison, so the months of use those payments buy are not counted as an asset on either side. That is a modeling choice.

Method and sources

The model is calculateLeaseVsBuy in the lease vs. buy calculator. It steps through both paths month by month. Break-even values were found by bisection against the same model, one input at a time.

• Federal Trade Commission, Financing or Leasing a Car — lease payments cover depreciation, a rent charge, taxes and fees; the annual mileage limit and the fee for exceeding it; responsibility for excess wear and damage; insurance to the lessor's standards.
• Consumer Financial Protection Bureau, Regulation M, § 1013.4 — the disclosures required in a consumer lease, including residual value, disposition charges and the excess wear and mileage notice.

Open this scenario in the calculator

All figures on this page come from the Lease vs. Buy Car calculator. Change any input there and the numbers update.