To compare the costs of leasing, buying new and buying used, we'll use a popular vehicle in our examples: a compact SUV. Most owners in the U.S. keep their new and used vehicles for 79 months — just over 6.5 years That's the length of ownership we are assuming here. To match that period, we are basing the leasing example on two back-to-back three-year leases, totaling 72 months. You can see the other assumptions behind these examples at the end of the story:
Leasing: The average lease cost is based on a compact SUV that sells for $27,142 and has drive-off fees of $2,038. For the lease's interest rate, better known as the money factor, we've used the average amount: 0.000833. This results in a $330 monthly payment for three years. We used the same numbers for the second three-year lease.
Buying New: The average amount financed for a new car is about $26,830, with a down payment of $3,181. The average interest rate is 4.5 percent, resulting in a monthly payment of $426.
Buying Used: The average amount financed for a 3- or 4-year-old compact SUV is $18,691 with an average down payment of $2,275. The interest rate for used-car loans is usually higher than for new, and in our case it would be about 7.2 percent. These factors result in a monthly payment of $344.
After six years, here are the total out-of-pocket costs for each financing method:
| ||Buying Used ||Leasing ||Buying New |
|Total out-of-pocket costs ||$24,966 ||$27,836 ||$33,682 |
In terms of out-of-pocket spending, leasing costs $5,846 less over six years than buying a new car, excluding any repair costs the new car might incur. The out-of-pocket cost of buying a used car is $2,870 cheaper than leasing and a $8,716 cheaper than buying a new car. We have excluded any costs of repair for the used car.