You are essentially "renting" the car’s depreciation. Your monthly payment is calculated based on the difference between the car’s price today and its projected value in three years (the residual value), plus interest and fees. Since you aren't paying for the whole car, the monthly payments are significantly lower.
gives you total freedom. You can drive 30,000 miles a year, spill coffee on the seats, and install a custom roof rack without asking anyone for permission. The "New Car" Itch: car lease versus buy analysis
Leasing is great for immediate cash flow. It allows you to drive a more expensive, safer, or more fuel-efficient car for a smaller monthly check. It also requires a smaller down payment (or none at all). You are essentially "renting" the car’s depreciation
comes with strict "rules." Most contracts limit you to 10,000 or 12,000 miles per year. If you have a long commute or love road trips, the overage fees (often $0.20–$0.30 per mile) can be a nasty surprise. You also have to return the car in "excellent" condition or pay for dings and scratches. gives you total freedom
You want a lower monthly payment, you drive a predictable number of miles, you want the latest technology, and you don’t mind a perpetual car payment in exchange for peace of mind.
You want to eventually stop making payments, you drive a lot, or you want the flexibility to sell the car whenever you choose.
If you plan to drive your car "into the ground" (8–10+ years), is the only logical choice. The most cost-effective years of car ownership are years 5 through 10, when the loan is gone but the car is still reliable. 4. Maintenance and Repairs