Why Leasing vs Buying Comes Down to How You Use a Vehicle

Lease penetration in the new car market declined significantly when interest rates rose and residual values fell from their 2021 and 2022 peaks. Monthly lease payments have risen to the point where the payment difference between leasing and buying a new vehicle has narrowed in many segments. Some manufacturers have adjusted lease programs with increased subsidies to maintain volume, while others have pulled back entirely.

For Indiana buyers who drive typical Midwest distances, often 12,000 to 18,000 miles per year, leasing can produce overage charges at turn-in that eliminate any cost advantage. Buyers who regularly drive 15,000 or more miles annually on a lease structured for 10,000 or 12,000 miles per year pay mileage overages that can total $1,500 to $3,000 at lease end.

Match the Structure to Your Actual Usage Pattern

Before deciding between leasing and buying, calculate your actual average annual mileage from the past two years. If you consistently drive below 12,000 miles annually, want a new vehicle every two to three years, and do not want the responsibility of selling or trading, leasing can be a reasonable choice at current rates. If you drive more than 15,000 miles annually or expect to, buying is almost always less expensive when mileage overage costs are factored in. Compare the total cost of each option over the same period, three years for a lease versus three years of a purchase, to make the comparison directly.

Lessees who underestimate their mileage pay per-mile overage fees at turn-in, typically $0.20 to $0.25 per mile over the contract limit. On a 36-month lease where the driver averages 18,000 miles against a 12,000-mile contract, overages total $3,600 to $4,500 at return, which eliminates most of the payment savings the lease provided.