Should You Buy or Lease Your Next Vehicle?

After 5 years as a proud minivan owner, my wife and I recently purchased an SUV. For simple trips around Raleigh the van was adequate, but with our frequent treks to see my parents in Florida combined with the taxing drive through the mountains of West Virginia to get to Emily’s family in Ohio, we needed something more reliable. Ultimately, after lots of research and finding a good deal on the vehicle we wanted, plus some email negotiations back and forth (all those articles you find online about how to negotiate the best price really work!), we settled on a 2018 All-Wheel Drive Toyota Highlander XLE.

During the months leading up to our purchase, Emily brought up the idea of leasing, which certainly offers some benefits: the payments tend to be lower, you get something new every few years, and rarely do you have to worry about maintenance.

While we ultimately ended up buying, I thought it would be a worthwhile exercise to run through the numbers to see when it might be advantageous to buy and when to lease. You may remember that Beacon went through a similar exercise a few years back in our most widely read and frequently visited Friday Brief, “Should Young Couples Buy or Rent Their First Home?”

Figure 1

Figure 1 shows the actual numbers from our purchase on the left and numbers provided to me by the dealership for a 3-year, 12,000 miles per year lease on the same Highlander. As I said earlier and as you can see by the difference in the MSRP and Negotiated Price, all that “here’s how to negotiate the best price on a new car” stuff you see online is quite helpful.


We added an extended warranty, stretching the 3-year bumper-to-bumper to 10-years, and financed everything through our local credit union at 3.29% over 5 years.

To run the numbers, certain assumptions were made about repairs, maintenance, property taxes, insurance, and mileage driven. Thankfully, property taxes can be estimated through the North Carolina’s Vehicle Property Tax Estimator, and Edmunds has data on the 5 year cost to own a 2018 Highlander just like the one Emily and I bought. For miles driven, I assumed 15,000 per year based on data compiled by the federal government (the lease only allows 12,000 miles per year, then $.18 for every mile over) and for auto insurance I’m using our actual annual bill.

Looking at Figure 2, you can see the break-even point is about five-and-a-half years, though the numbers run essentially side-by-side starting in year four. Yet as soon as the Highlander is paid off, leasing is no match for buying. Thus, if you anticipate owning a car less than five-and-a-half years, you are probably better off leasing. Longer than that, it’s probably in your best interest to buy. As long as you’re buying a reliable vehicle that will hold it’s value, of course.

Figure 2

As you can see, the difference over 10 years is roughly $40,000, not insignificant. (Keep in mind, these calculations only look at cash flow and don’t account for the asset you own after the loan is paid off, which tilts the scales even more towards owning.)

What if we look out 15 years? You can see in Figure 3 that the long-term difference in cost between buying and leasing is more than $80,000!

Figure 3

It’s important to point out that somewhere between 63%-80% of the cost of owning a vehicle occurs while you’re re-paying the loan. Owning a quality car is pretty affordable once it’s paid off, allowing you greater long-term financial flexibility and the building up of significant positive financial momentum.

There may be lifestyle or business reasons to long-term leasing, but the cost of constantly turning over a lease is substantial. Used differently, that $80,000 could cover a couple years of college, or weddings, or family vacations, or gifts to your church or alma mater, or a little bit of everything!

Intuitively, Emily and I understood that buying was a better long-term decision but taking the time to dig into the numbers made me realize just how costly long-term leasing can be. While we didn’t have these numbers handy beforehand, it’s confirmed the choice we made to buy as the goal is to have the Highlander 10-15 years.

If you’re interested in reading more about the impact of what we drive on our financial futures, be sure to check out these two blog posts:

Have a great weekend!



Ryan Smith
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Born and raised on the North Shore of Massachusetts, I moved to Raleigh in 2011 to marry my wife, Emily. We have two kids, Jack and Gwen, a golden retriever named Olly, and are members of Church of the Apostles. I have been a Financial Advisor since 2005 and earned a Master’s of Science in Financial Planning from Bentley University in 2007. I became a CFP® professional in 2009, a Retirement Income Certified Professional® in 2015, and a Certified Tax Specialist™ in 2023.