Cash, finance, or lease? The monthly payment tells you almost nothing — lease payments look cheapest but you own nothing at the end. Compare the real total cost of all three side by side.
- Vehicle: $0
- Sales tax: $0
- Fees: $0
- No interest
- ✅ You own it
- Down: $0
- Loan: $0
- Interest: $0
- Term: 0 months
- ✅ You own it
- Down: $0
- Depreciation paid: $0
- Residual value: $0
- Buyout total: $0
- ❌ You return it
Estimates. Actual costs depend on your credit score, dealer fees, state taxes, and lease terms (money factor, mileage limits). Lease assumes a money factor equivalent to your APR. Excludes insurance, maintenance, and registration.
Why the monthly payment lies
Dealers sell you a monthly payment, not a car. A lease payment is almost always lower than a loan payment on the same vehicle — because you're only paying for the depreciation during the lease, not the whole car. At the end, you hand it back.
The three options, honestly
💵 Cash
- Cheapest overall — no interest, ever
- You own the car outright from day one
- Downside: ties up a lot of capital. If you could invest that money at a higher return than the loan rate, financing may make sense
🏦 Finance (auto loan)
- You own the car; the interest is the price of spreading it out
- Watch the term. A 72- or 84-month loan lowers the payment but you pay far more interest — and you'll be underwater (owing more than the car is worth) for years
- Rule of thumb: if you can't afford it on a 48–60 month loan, the car is too expensive
🔑 Lease
- Lowest monthly payment, newest car, warranty covers most repairs
- You own nothing at the end. You've paid for the depreciation and handed back the car
- Mileage limits (typically 10–12k/year) — overage fees are steep
- Wear-and-tear charges at turn-in can surprise you
When leasing actually makes sense
- You want a new car every 2–3 years and accept that as a cost of living
- You drive low mileage and stay under the cap
- Business use — the payment may be deductible (ask your accountant)
- The car is a model with terrible reliability or fast depreciation — let the leasing company eat it
Terms the dealer hopes you don't ask about
| Term | What it means |
|---|---|
| Money factor | The lease interest rate in disguise. Multiply by 2,400 to get the APR. (0.00250 = 6% APR) |
| Residual value | What the car is worth at lease end. Higher residual = lower payment |
| Cap cost | The negotiated price. Yes, you can negotiate a lease price — most people don't |
| Doc fee | Dealer paperwork charge. Sometimes negotiable, sometimes capped by state law |
Negotiate the price, not the payment. Settle the out-the-door price first. Only then discuss how you'll pay for it. Dealers can hide a bad price inside a "good" monthly payment by stretching the term.
Compare total cost over the time you'll keep the car, not monthly payments. A lease that looks $150/month cheaper can cost more in the long run — and you end up with nothing.
These are estimates. Actual costs depend on your credit, dealer fees, state and local taxes, and specific lease terms. Insurance, maintenance, and fuel are not included. This is general information, not financial advice.