Lease vs Buy: Which Is Better Value?

Buying tends to work out better the longer you keep a car, because you stop paying for depreciation at the steepest point and eventually own it outright. Leasing avoids the upfront cost and the risk of the car losing more value than expected, but you never own it. Over the same few years, compare the lease total with what the car would cost you to buy, sell and finance.

Side-by-side comparison

Leasing a car compared with buying it outright, feature by feature
FeatureLeaseBuy
Upfront costAn initial rental, often a multiple of the monthly paymentThe full price, or a deposit if you borrow the rest
Monthly paymentsFixed for the termNone if you pay cash; loan repayments if you borrow
DepreciationBuilt into the rentals; you carry no resale riskYou carry all of it, and the resale value is not guaranteed
Owning the carNoYes
Maintenance and repairsYour responsibility unless you add a maintenance packageYour responsibility, including repairs once the warranty ends
Mileage limitsYes, with excess mileage chargesNone, though high mileage lowers the resale value
FlexibilityFixed term; ending early is usually expensiveSell whenever you like, at whatever the market will pay
Your moneyNot tied up in the carTied up in the car, so it cannot earn interest elsewhere

Who each option suits

Lease

Best forDrivers who want a newer car every few years with fixed monthly costs, and who do not want to sell a used car later.

Buy

Best forDrivers who keep cars for many years, drive high mileage, or want to own the car and have the cash or affordable finance to do it.

Key takeaways

  • The biggest cost of buying a new car is usually the value it loses in the first few years.
  • Leasing passes that risk to the leasing company, but you pay for it in the rentals and never own the car.
  • Money spent buying a car cannot earn interest elsewhere; count that as a cost.
  • The longer you keep a car you have bought, the more the comparison tends to favour buying.

Total Car Cost Calculator

Compare a lease with a cash purchase, including the resale value, running costs and extras.

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How to compare the cost

Compare the two over the same period, using real quotes:

  • Lease: initial payment + monthly payment × number of months.
  • Buy: purchase price − what you could sell the car for at the end + the interest your money could have earned (or the interest you pay if you borrow).

Insurance and fuel cost the same either way, so they can be left out. Road tax is usually included in a lease but paid by you when you buy, so add it to the buy side. Maintenance is your cost either way unless the lease includes it.

A worked example

These figures are illustrative only, to show the method. They are not typical prices.

  • Lease for three years: an initial payment of £3,600 and 36 monthly payments of £300 = £14,400.
  • Buy the same car for £25,000 and sell it after three years for £14,000: the car loses £11,000. If the £25,000 could otherwise have earned 4% a year in simple interest, that is another £3,000 over three years. Total: £14,000.

In this example the two are within £400 of each other. Small changes to the resale value or the interest rate would change which comes out ahead, which is why it is worth running your own numbers.

If you kept the bought car for longer, you would stop paying the steepest part of its depreciation, so buying usually becomes better value the longer you keep the car.

Which should you choose?

Buy if you plan to keep the car for many years, drive high mileage or want to own it. Lease if you value fixed monthly costs and a new car every few years, and are happy never to own it. If you want something in between, PCP gives you the option to buy at the end; see Lease vs PCP.

FAQs

Is it cheaper to lease or buy a car?
It depends on how long you keep the car, how much value it loses, and what your money could earn elsewhere. Over a short term, the answer depends on the deals you are offered. Over many years, buying usually comes out ahead because you stop paying for the steepest part of the depreciation.
Does leasing include maintenance?
Not usually. Maintenance is normally an optional extra on a personal lease, so check what your quote includes.

The worked example uses illustrative figures, not real quotes or market prices. Replace them with your own. This comparison is general guidance, not financial advice.

Sources and review

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