Lease advertisements often show a lower monthly payment than financing the same vehicle. That can make leasing appear cheaper, but payment alone is not a complete comparison.
What are you paying for in a lease?
The Federal Trade Commission explains that a lease generally charges for the vehicle’s expected depreciation during the lease period, plus rent charges, taxes and fees.
You are paying for the right to use the vehicle rather than buying it outright.
What are you paying for when buying?
When financing a purchase, payments reduce the loan balance and the vehicle remains an asset with a resale or trade-in value.
At the end of a three-year comparison, you may still owe money on the loan, so both the remaining balance and vehicle value matter.
Compare the same three-year period
Lease: upfront payment, monthly payments, taxes, acquisition/disposition fees, excess-mileage charges and possible wear charges.
Buy: down payment, loan payments, interest, taxes and fees, minus estimated vehicle equity or resale value.
Mileage can change the answer
The FTC notes that leases normally include mileage limits. Exceeding the agreed mileage can create additional charges when the vehicle is returned.
There is no universal winner
Leasing can suit drivers who prefer a newer vehicle every few years and stay within lease terms. Buying can become more attractive when the vehicle is kept well beyond the financing period.
Source
Federal Trade Commission consumer guidance on financing and leasing vehicles.
Lease and finance offers vary by vehicle, lender, state and buyer qualifications.