Lease vs Buy a Car: The 60-Month Decision Most Drivers Get Wrong

The lease-vs-buy car question gets framed in dealerships as a comparison of monthly payments, and that’s exactly the framing that produces the wrong answer. A $399/month lease looks cheaper than a $649/month finance payment until you notice the lease has no equity, no tradeable asset at the end, and a list of fees the brochure doesn’t mention. A $649 finance payment looks expensive until you notice the resale value at year 5 covers most of the cumulative cost on a Toyota and almost none of it on a luxury German sedan.

The honest comparison is total cost over 60 months— the typical hold horizon people actually consider when comparing “lease two cars in a row” versus “buy one and keep it.” Lease total = monthly payment × 36 (or 39) + acquisition fee + disposition fee + over-mileage charges + excess wear, plus the second lease’s costs from month 37 onward. Buy total = down payment + monthly payment × loan term + interest + maintenance out of warranty − resale value at month 60. The two numbers are comparable; the monthly payments are not.

The decision’s answer depends mostly on two variables most shoppers don’t price honestly: annual miles (over 12K/year usually breaks the lease case) and model depreciation curve(depreciation- resistant Toyotas and Hondas favor buying; depreciation-heavy luxury sedans and many EVs often favor leasing). This guide runs the math both ways for a Toyota Camry, a BMW 3 Series, and a Tesla Model Y, walks the over-mileage trap that costs leaseholders thousands at turn-in, and explains the rare cases where the conventional “always buy” or “always lease” advice is right. The Lease vs Buy Car calculator runs every formula below in real time.

The Wrong Comparison: Monthly Payment

Walk into any dealership and the salesperson will price the comparison in monthly-payment terms because that’s the framing that wins them the sale. “You can have this Camry for $399/month leased or $549/month financed — which fits your budget?” The implicit math: the lease is $150/month cheaper, you save $9,000 over 60 months, easy win.

The actual math: that same Camry leased for 36 months at $399 = $14,364 in payments, plus ~$2,500 in fees and tax, plus the $399 due at signing, totals roughly $17,300 with nothing to show for it at month 36. You then need a second car — another lease at presumably similar terms (now priced at year-3 used-car costs, slightly higher) gets you through months 37–60 for another ~$15,500. Five-year lease total: $32,800, cumulative.

The same Camry financed at $549/month for 60 months is $32,940 in payments, which sounds equivalent. But you own the car at month 60, and a 5-year-old Camry with 60K miles is worth roughly $18,000–$21,000in 2026’s used market. Net cost of ownership: $32,940 + ~$3,000 maintenance − $19,500 resale = $16,440. The buy case wins by ~$16,000 over 60 months on a Camry, which is completely invisible in the monthly-payment comparison.

The Honest Math: 60-Month Total Cost

Each piece needs unpacking. The lease side has more fees than most shoppers track: acquisition fee($595– $1,095, baked into the cap cost or due at signing), disposition fee($350–$595, charged at turn-in unless you buy out the lease or roll into another lease with the same captive lender), over-mileage charges($0.20–$0.30 per mile over the contract limit, paid at turn-in — we’ll cover this in detail), and excess wear and tear charges (anything beyond “normal” condition, adjudicated subjectively by the lessor — budget $500–$1,500 if you’ve had the car for 36 months with kids or pets). The cap reduction (“down payment”) on a lease is also money you’re unlikely to recover — if the car is totaled in month 6, the cap reduction is gone and the insurance settles to the lessor, not you.

The buy side’s key variables: resale value at month 60 (the make-or-break number; varies wildly across model classes), total interest paid (depends on loan term and APR; a 60-month loan at 7.5% APR on a $32K starting balance pays roughly $6,400 in cumulative interest), and out-of-warranty maintenance (most factory warranties cover 36/36 or 5/60; from year 4 onward you’re paying for brake pads, tires, fluid service, and any unscheduled repairs). Reliable models run $400–$800/year in years 4–5; less reliable models can hit $1,500–$3,000.

The Two Model Classes That Drive the Decision

The single most important variable in the lease-vs-buy decision is the depreciation curve of the specific model you’re considering. Cars don’t depreciate uniformly — some lose 50% of value in three years, some lose 25%. The lease company prices their monthly payment based on their depreciation forecast (the “residual value” at lease end), so if their forecast is right, leases on different models shouldbe roughly equally good or bad deals on a unit-of-utility basis. They usually aren’t, because the forecast is conservative (lease companies want to be safe at turn-in) and the actual used-car market often beats it.

Class 1: Depreciation-resistant.Toyota (Camry, Corolla, RAV4, Highlander, Tacoma, 4Runner), Honda (Civic, Accord, CR-V, Pilot), Subaru Outback/Forester, some Lexus, some Mazda. These models retain 55–65% of value at 5 years/60K miles in normal market conditions, sometimes more during used-car shortages. The lease residual the captive lender prices in at month 36 is usually under what the car is actually worth in the used market — meaning the lease is overpriced relative to the buy case. Buying these models, holding 5+ years, and reselling captures most of the residual value yourself rather than handing it back to the lessor.

Class 2: Depreciation-heavy.Most luxury German sedans (BMW 3/5/7, Mercedes C/E/S, Audi A4/A6/A8), many EVs that aren’t Tesla (electric depreciation has been brutal in the post-2022 EV-glut market — Bolts and Leafs and some Lucids and Polestars have lost 40–50% in two years), most Cadillacs and Lincolns, and any car with a known reliability tail (Range Rover, Maserati, Alfa Romeo). These models lose 50–65% of value at 5 years, sometimes more. The lease residual is usually realistic-to- generous, which means the captive lender takes the depreciation risk — and you pay only for the steeper-depreciation portion of the curve up front. Leasing these models often beats buying because you avoid being the owner-of-record at year 4 when the timing chain stretches or the air suspension fails and the car is worth $22K with a $9K repair quote.

Tesla is the interesting middle case. Model 3 and Model Y depreciation has been volatile — very strong in 2021– 2022 (the depreciation curve was almost flat), then steep in 2023–2024 as Tesla cut new prices repeatedly, forcing used prices down hard. By 2026 the curve has stabilized around the broader luxury-EV norm of 50% loss at 5 years. Lease vs buy on a Tesla is genuinely close in 2026 and depends heavily on whether you expect them to keep cutting prices.

Worked Example #1: Toyota Camry XLE, 12K Miles/Year

Mid-trim Camry XLE, MSRP $33,500, negotiated out-the-door at $32,000 with no add-ons.

Lease scenario: 36-month lease, 12K miles/ year (the standard contract), $399/month plus $1,500 down at signing, money factor implying ~6.5% APR, residual value at end set at 58% = $19,430.

• Down at signing: $1,500
• Monthly payments: $399 × 36 = $14,364
• Acquisition fee (rolled into above or separate): $895
• Disposition fee at turn-in: $395
• Subtotal first lease: $17,154, no equity at end
• Second lease for months 37–60 (24 more months at ~$430/month, prorated): roughly $11,500
• Cumulative 60-month lease total: ~$28,650

Buy scenario: $32,000 OTD, $5,000 down, $27,000 financed at 7.5% APR over 60 months = $541/month.

• Down: $5,000
• Monthly payments: $541 × 60 = $32,460
• Total interest paid: ~$5,460 (included in payments above)
• Out-of-warranty maintenance years 4–5 (Toyota factory warranty 3/36 powertrain, 5/60 hybrid): ~$1,800
• Resale value at 60 months / 60K miles: $32,000 × 0.62 ≈ $19,840
• Net cost: $5,000 + $32,460 + $1,800 − $19,840 = $19,420

The buy case beats the lease case by ~$9,200over 60 months on a Camry. The gap is even wider if you keep the car beyond month 60 — year 6–8 of Camry ownership are essentially free (the depreciation has already happened, maintenance is modest). For Toyota and Honda specifically, leasing is almost always the worse financial choice. The only reason to lease a Camry is the convenience of always having a new car under warranty, which is a real preference but a real cost.

Worked Example #2: BMW 330i, 12K Miles/Year

BMW 330i, MSRP $48,000, negotiated OTD at $45,500.

Lease scenario: 36-month, 12K miles/year, $549/month plus $3,000 due at signing, residual at end set at 56% = $26,880.

• Down at signing: $3,000
• Monthly payments: $549 × 36 = $19,764
• Acquisition fee: $925
• Disposition fee: $495
• Subtotal first lease: $24,184
• Second lease months 37–60 (24 more months at ~$580/month, prorated): roughly $15,400
• Cumulative 60-month lease total: ~$39,580

Buy scenario: $45,500 OTD, $7,000 down, $38,500 financed at 7.5% APR over 60 months = $773/month.

• Down: $7,000
• Monthly payments: $773 × 60 = $46,380
• Out-of-warranty maintenance years 4–5 (BMW 4/50 warranty + scheduled service often included for first 3 years, then the car gets expensive): ~$3,200, with risk of $5K+ if the cooling system or one of the electronic modules fails
• Resale value at 60 months / 60K miles: $45,500 × 0.45 ≈ $20,475 (3 Series depreciation has been brutal post-2022)
• Net cost: $7,000 + $46,380 + $3,200 − $20,475 = $36,105

The lease case beats the buy case by ~$3,500over 60 months on a BMW 330i — and the lease case has substantially less downside risk if a major repair hits in years 4–5. The all-in numbers are close, but the variance is much higher on the buy side: best- case BMW ownership matches the lease, worst-case (one $6K repair plus weak resale) the buy case is $5K–$10K worse than the lease. For depreciation-heavy German luxury, leasing is often the rational call — especially if you rotate cars every 3 years anyway.

Worked Example #3: Tesla Model Y Long Range, 12K Miles/Year

Tesla Model Y Long Range, base price after 2024–2025 cuts: $44,990, federal EV tax credit $7,500 effective price ~$37,490.

Lease scenario: 36-month, 12K miles/year, $499/month plus $2,500 down. Tesla doesn’t pass the full $7,500 EV credit through to lessees in all states (and the policy has shifted; 2026 baseline assumes ~$5,000 credit baked into the residual). Residual set at 53% = $23,845.

• Down at signing: $2,500
• Monthly payments: $499 × 36 = $17,964
• Acquisition fee: $695
• Disposition fee: $395
• Subtotal first lease: $21,554, no equity
• Second lease months 37–60: roughly $13,500
• Cumulative 60-month lease total: ~$35,050

Buy scenario: $44,990 financed at 6.49% Tesla rate (their captive lender), $5,000 down, $39,990 financed over 60 months = $782/month, federal $7,500 credit applied at point of sale.

• Effective down after credit: $5,000 − $7,500 (or use credit toward down): functionally $0 net cash out beyond down
• Monthly payments: $782 × 60 = $46,920
• Maintenance over 5 years (EVs have minimal scheduled maintenance — tires, brake fluid, coolant, cabin filters): ~$2,000
• Resale value at 60 months / 60K miles in 2031: harder to forecast given EV market volatility. Conservative estimate $44,990 × 0.42 ≈ $18,895 (assumes continued price-cut pressure on new EVs); optimistic case $22,000+
• Net cost (using $5,000 down minus $7,500 credit = +$2,500 net): −$2,500 + $46,920 + $2,000 − $18,895 = $27,525

Buy case beats the lease case on a Tesla Model Y by ~$7,500— mostly because the federal EV tax credit goes to the buyer, not (fully) to the lessee in most states. Without the credit, the two cases are within $1,500 of each other. The Tesla case is the cleanest example of why model-specific incentives matter: the same general decision (lease vs buy a luxury EV) flips based on a single line of tax law. As EV credit policy shifts in the late 2020s, this answer may flip again. Run the math at purchase time, not from internet wisdom from two years ago.

The Over-Mileage Trap

The single line item that destroys lease economics for many drivers, and the one most underestimated when signing the contract. Standard leases come with 10K, 12K, or 15K miles per year, and the over-mileage charge is typically $0.20–$0.30 per mile at turn-in. That sounds modest until you do the math at scale.

A driver who signed for 12K/year and actually drives 17K/year is 15,000 miles over by month 36. At $0.25/mile, that’s a $3,750 billat turn-in — cash, due immediately, on top of the disposition fee. A driver who thought they’d be at 12K and ended up at 20K is 24,000 miles over: $6,000. These bills are common and they erase any nominal lease-vs-buy savings entirely.

The honest pre-lease check: pull your last three years of annual mileage from your car’s service records, your insurance reports, or your odometer history. Most drivers run 12K–15K, but knowledge workers in cities with public transit run 6K–9K and field-sales / multi-job / long-commute drivers run 18K–25K+. If your honest annual mileage is over 15K, leasing’s economics are broken even before the depreciation discussion — either negotiate a higher mileage cap (which adds $30–$60/month and partially offsets the savings), or skip leasing entirely.

The other trap inside the trap: dealers and lessors will sell you the option to pre-payfor higher mileage at contract signing for less than the over-mileage rate. This sounds like a deal until you realize it’s non- refundable — if you signed up for 18K/year and only drove 14K, you don’t get a refund on the prepaid unused miles. The pre-pay only works in your favor if your forecast is genuinely accurate, which most aren’t.

When Leasing Wins

• Depreciation-heavy luxury models with predictable repair tails.BMW 3/5 Series, Mercedes C/E Class, most Audis, Range Rovers, Maseratis. The lessor takes the depreciation risk, you avoid being the owner-of-record when expensive systems fail in years 4–5.
• You rotate cars every 3 years anyway.If you’re going to trade in at month 36 regardless, leasing matches the cash flow without the asset-sale friction. The buy-then-trade-in case loses 8–10% on the dealer-trade haircut, which often equals or exceeds the lease’s ownership-cost premium.
• Business use with deductible payments. Lease payments on a vehicle used for business can be 100% deductible (proportional to business use) versus the depreciation-schedule complexity of buying. For sole proprietors or freelancers with high business mileage, the tax math sometimes flips the lease case decisively.
• You drive 8K–12K/year on a normal contract. The over-mileage trap doesn’t hit, the depreciation you’re paying for is the depreciation that actually happens, and the lease’s convenience-of-warranty benefit applies cleanly.
• You want to drive a higher-class car than you could afford to buy outright.Honest framing: leasing lets you experience a $55K BMW for $549/month when the buy case at the same monthly cash flow only gets you a $32K Camry. The trade-off is real wealth-building — you’re paying for an experience, not an asset. That’s a legitimate preference if you understand the trade.

When Buying Wins

• Depreciation-resistant Toyotas and Hondas. Almost always buy. The 5-year resale value covers most of the cumulative cost of ownership, the maintenance is predictable and modest, and keeping the car beyond 60 months is essentially free transportation.
• You drive over 15K miles/year. Over- mileage charges destroy lease economics. Buy and drive the car as hard as you want.
• You hold cars 7+ years.The longer the hold, the more the math favors buying — lease cycles stack up at fixed costs every 36 months while a paid-off car keeps providing transportation for the cost of fuel and maintenance.
• You can pay cash or finance very short. The interest cost on a 60-month loan is meaningful; paying cash or financing 24–36 months at low APR drops total cost of ownership materially. Cash buyers almost always come out ahead of leasers on equivalent vehicles.
• You qualify for the federal EV tax credit on a purchased vehicle. The $7,500 credit goes directly to buyers; lessees only sometimes capture it (varies by lender and state). On a Tesla, Bolt, or Mach-E, the credit alone tips the math toward buying.

Common Mistakes

• Mistake: comparing monthly payments instead of 60-month total cost.The dealership’s favorite framing. The right comparison is total cost including resale value at month 60 minus all leasing fees and over-mileage. Run both numbers in the Lease vs Buy calculator before signing.
• Mistake: putting cash down on a lease. Cap reduction money is unrecoverable if the car is totaled (insurance settles to lessor) and provides minimal benefit even if you complete the lease cleanly. The general rule: keep cash-down on a lease as low as possible, ideally just the first month’s payment plus tax-and-tags. The monthly payment goes up; your downside exposure goes down.
• Mistake: underestimating annual mileage. The honest pre-lease check is your last three years of actual driving. If you’re over 15K/year, leasing almost always loses to buying. Don’t sign a 12K contract hoping you’ll drive less — people rarely do.
• Mistake: ignoring the cost of cycling cars. Leasing creates a permanent ~$400–$700/month cash-flow line for life. Buying creates the same line for 5–7 years and then drops to near zero (just maintenance and insurance) for the next 3–5 years if you keep the car. The lifetime cost of always-leasing versus buy-and-hold is six figures by retirement.
• Mistake: assuming you can negotiate the residual. You can’t. The residual value is set by the captive lender, not the dealer, and it’s baked into the lease pricing. What you can negotiate is the cap cost (the “price” the lease is built on) and the money factor (the lease’s effective interest rate). Negotiate those two; the residual is fixed.

Run Your Own Numbers

The fastest honest answer for your specific car lives in the Lease vs Buy Car calculator. Enter the lease monthly, term, and mileage; the buy price, loan terms, and your honest hold horizon; the calculator returns the total 60-month cost both ways and the break-even ownership year where buying becomes cheaper than continuous leasing. The tool also surfaces the over-mileage risk and the resale-value sensitivity (what if the car is worth $2K less than expected at month 60?).

For the underlying loan math, the loan EMI calculator runs the financing payment in real time. To check whether the car itself fits any reasonable affordability framework before running the lease-vs-buy comparison, use the budget calculator. And if you’re comparing two cars in different depreciation classes — say a Toyota 4Runner versus a BMW X3 — the per-mile and per-month total-cost math in the calculator surfaces the model-specific gap that’s invisible in any monthly-payment comparison.

Browse the broader set in the auto calculator category. The lease-vs-buy decision compounds across decades — a lifetime leaser pays $300K+ more for transportation than a buy-and-hold owner of equivalent cars. Worth getting right on the first contract, not the fifth.