Entry № 13 · logged Oct 1, 2026Free, no sign-upLease vs Buy · Car Finance
Is leasing cheaper than buying? Only when the deal is.
Usually, no: on an ordinary offer the buyer keeps thousands in equity and the lease keeps nothing, so buying wins the net-cost game. But subsidized manufacturer leases — high residual, money factor near zero — are the exception, and they’re common enough to be worth checking. The slip below is seeded with exactly such a deal: $389 a month, $1,999 due at signing, on the same $35,000 car. The verdict: the lease wins by $4,271.
$389 a month, $1,999 due: the lease posts $16,003 against the buyer’s $20,274 — leasing wins by $4,271.
The dealer's desk slip, Form LVB-13. Left ledger: the lease offer, line by line. Right ledger: buying the same car with a loan, minus the equity you keep. Every keystroke re-posts the net-cost verdict below the tear line.
Net cost is what each path really costs you: the lease's drive-off plus every payment plus mileage overage, against the buyer's down payment plus loan payments minus the equity left in the car at the end. The comparison window is the lease term.
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From the ledger
What a lease has to look like to beat buying
The buyer’s number barely moves: $3,500 down, $616.33 a month, $5,414 of net equity kept at 36 months — net $20,274. So the lease has to land under that. At $389 a month with $1,999 due at signing it posts $16,003, a full $4,271 under. The gap comes from the subsidy: the manufacturer inflates the residual value (which shrinks the depreciation you pay for) and cuts the money factor (which shrinks the rent charge). Both are real money, and both show up in the net cost.
How to spot one: the lease payment sits well under 1% of the car’s price per month — $389 on $35,000 is 1.11%, but against a subsidized residual it behaves like a sub-1% deal — and the money factor, once you translate it (factor × 2400 ≈ APR), sits at or below the loan APR you’d get. The old “1% rule” is crude, but it’s a decent sniff test: if the payment is over 1.3% of MSRP a month with normal drive-off, the lease is probably losing.
The break-even line makes it mechanical. On the seeded numbers the fair lease price is $493.72 a month; the $389 offer sits $105 under it, and that $105 times 36 months is most of the $4,271 gap (the rest is the lower drive-off). Take any offer to the slip, read the break-even line, and you know in one number whether the deal is subsidized or just shiny.
Disclaimer: the figures here are arithmetic, not financial advice. Resale values are guesses, money factors are negotiable, and your credit decides your rate — the dealer’s worksheet has the final word.
Filed answers
Questions from the finance office
Why would a manufacturer subsidize a lease?
To move metal without cutting the sticker price: a high residual lowers the payment while protecting the brand’s pricing, and the subsidy costs them less than a rebate on every sale. Slow sellers, outgoing model years, and EVs with uncertain resale values get subsidized most. It’s a real discount — the slip above shows one worth $4,271.
What’s the “1% rule” for leases?
A rule of thumb: a good lease payment is around 1% of the car’s MSRP per month with modest drive-off. It’s crude — it ignores residuals and money factors — but it’s a fast sniff test. The $389 deal on a $35,000 car passes it; a $520 quote wouldn’t. For the real verdict, the net-cost slip beats any rule of thumb.
Do lease deals include the $7,500 EV tax credit?
Often, yes — and it’s one of the biggest lease subsidies going. On many EV leases the lessor claims the commercial clean-vehicle credit and passes it through as a capitalized-cost reduction, which can shave $200+ a month off the payment. If you’re comparing an EV lease to a purchase, make sure the credit is actually in the offer before you run the numbers.
Is a $0-down lease a good deal?
Not automatically — $0 down just moves money from the drive-off line into the monthly payment line, and the net cost barely moves. What matters is the total: drive-off plus every payment. A $0-down lease at $460 a month costs more than a $2,500-down lease at $389. The slip totals it; the headline payment doesn’t.
What is a money factor, and how do I read it?
The money factor is the lease’s interest rate wearing a costume. Multiply it by 2400 to get the APR: 0.00250 means about 6.00%. Dealers quote it this way because “0.00250” doesn’t invite comparison the way “6%” does. If the worksheet shows a factor above about 0.00375 — roughly 9% — you’re financing the lease at loan-shark rates.
Is this financial advice?
No — it’s arithmetic on numbers you type. It doesn’t check your credit, negotiate your money factor, or know what your car will really be worth in three years. The dealer’s worksheet and your own budget have the final word.
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