Depends on usage and timeline (2025 analysis): Lease Cheaper If: (1) Drive <12,000 miles/year, (2) Want new car every 3 years, (3) Avoid maintenance after warranty, (4) Low sales tax state (only pay tax on monthly payments).

Example: $40k car, 3-year lease $450/month × 36 = $16,200 total cost.

Buy Cheaper If: (1) Drive >15,000 miles/year (excess mileage fees $0.25/mile = $750/year over), (2) Keep car 6+ years, (3) High sales tax state (pay full tax upfront on purchase).

Example: Buy same $40k car, 6% loan, keep 10 years → $800/month × 60 = $48k, sell for $12k after 10 years = $36k net cost vs $54k for 3 consecutive 3-year leases ($16.2k × 3 + $1.8k excess mileage).

Breakeven point: If keeping car 5-6 years, buying wins. <5 years, leasing often cheaper monthly but no equity.

Average 2025: Lease payment 30-40% lower than buy, but 0 ownership.

Money factor: Lease rates 4-6% (money factor 0.0017-0.0025) vs buy APR 5.5-8% in 2025.

2025 lease costs beyond monthly payment: (1) Acquisition Fee (Lease Inception): $500-$1,000 upfront, non-negotiable bank charge. (2) Disposition Fee (Lease End): $350-$500 when returning car (waived if buying it or leasing another from same brand). (3) Excess Mileage: $0.20-$0.30/mile over limit (typical 10k-12k miles/year).

Example: 15k miles/year, 12k limit → 3k over × 3 years = 9k excess × $0.25 = $2,250 penalty. (4) Excess Wear & Tear: $200-$2,000 for scratches, dents, tire wear, interior damage.

Definition: Damage larger than credit card = chargeable. (5) Early Termination: Remaining payments + penalties if returning lease early (typically $500-$5,000). (6) Gap Insurance: $400-$600 over lease term if not included (covers difference between car value and lease payoff if totaled). (7) Higher Insurance: Leaseholder requires comprehensive + collision with low deductibles ($500 max) vs $1,000 for owned.

Cost difference: $200-500/year.

Total hidden costs example: $40k car lease → $800 acquisition + $400 disposition + $2,250 mileage + $500 wear + $500 gap = $4,450 over 3 years = $123/month extra on top of $450 payment.

Yes! Key negotiable items (2025): (1) Capitalized Cost (Price): Negotiate BELOW MSRP like cash purchase.

Dealers profit from lease markup.

Example: $45k MSRP, negotiate to $42k cap cost = $83/month savings.

Average discount: 5-10% off MSRP achievable. (2) Money Factor (Interest Rate): Dealers mark up by 0.0005-0.001.

Ask for "buy rate" (minimum lender allows).

Example: 0.0020 quoted, 0.0015 buy rate = $25/month savings on $40k.

Convert to APR: Money Factor × 2400 = APR (0.0020 × 2400 = 4.8%). (3) Residual Value: NON-negotiable (set by manufacturer based on depreciation).

Higher residual = lower payment but not controllable. (4) Trade-In: Negotiate separately, get CarMax/Carvana offers for leverage.

Do NOT mention trade until price agreed. (5) Acquisition Fee: Sometimes waivable if leasing multiple cars or loyalty customer ($500-1,000 savings).

NON-negotiable: Disposition fee, registration, taxes (but can minimize by lower cap cost).

Tactics: Get quotes from 3+ dealers online (TrueCar, Costco Auto), use end-of-month/quarter pressure (quotas), mention competitor offers. 2025 market: Electric vehicles (Tesla, Rivian) have aggressive lease incentives to move inventory - negotiate harder.

Three options at lease maturity (2025): (1) Return Vehicle: Most common (60% of lessees).

Process: Schedule inspection 30 days before end, pay disposition fee ($350-500), excess mileage ($0.20-0.30/mile over), wear & tear charges ($200-2,000 if damage).

Walk away, no further obligation. (2) Buy Vehicle (Lease Buyout): Pay residual value + $300-500 purchase option fee.

Example: $40k car, 60% residual = $24k buyout after 3 years.

Smart if: Market value > residual (common in 2025 due to supply shortage) or mileage way over limit (buying avoids penalty).

Financing: Can finance buyout through bank/credit union at 5-8% APR. (3) Lease Another Vehicle: Roll into new lease, disposition fee typically waived by same brand.

Loyalty incentives: $500-2,000 toward new lease.

Timing: Contact dealer 90 days before end to explore options.

Inspection: Get pre-inspection at Firestone/Pep Boys ($100-200) to fix issues before official inspection.

Wear & tear repair: Often cheaper to fix yourself ($300 bumper touch-up vs $800 dealer charge).

Equity scenario (rare): If market value $28k, residual $24k → Buy for $24k, immediately sell for $28k, pocket $4k equity (minus buyout fees). 2025 note: Chip shortage makes used cars valuable - check if your lease has hidden equity before returning.

2025 tax implications: Personal Use Lease: Sales tax only on monthly payments (not full vehicle price).

Example: $400/month lease in 8% tax state = $32/month tax = $1,152 over 3 years.

Same car bought at $40k = $3,200 sales tax upfront (saves $2,048 vs buying).

Some states (IL, TX, OH) tax full cap cost upfront even on lease.

Check local rules.

Personal Use Buy: Pay sales tax on full purchase price.

If financing, often rolled into loan.

No tax deduction for personal vehicles (unless home office use - depreciation allowed per IRS mile rate).

Business Use Lease (Deduction): Can deduct 100% of lease payments as business expense if used 100% for business.

Example: $450/month × 12 = $5,400/year deduction, 24% tax bracket = $1,296 tax savings/year.

Partial business use: Deduct proportionally (50% business use = 50% of payments deductible).

Luxury car cap: IRS limits lease payment deduction to ~$800/month for vehicles >$60k (2025 limit).

Business Use Buy (Depreciation): Deduct via Section 179 (up to $1,220,000 in 2025) or bonus depreciation (80% in 2025, phasing out).

Heavy vehicles >6,000 lbs (SUVs, trucks) can deduct full price in year 1.

Limitation: Regular cars limited to $20,200 first-year depreciation (2025).

Strategy: For business, leasing offers simpler deduction tracking vs depreciation schedules.

Consult CPA for specific situation.

2025 lease credit requirements: Tier 1 (Excellent): 720+ score → Qualify for best money factors (0.0015-0.0020 = 3.6-4.8% APR equivalent), $0 down leases, lowest acquisition fees.

Approval rate: 95%.

Tier 2 (Good): 680-719 score → Slightly marked up money factors (0.0020-0.0025 = 4.8-6% APR), may require $1,000-2,000 down.

Approval rate: 75%.

Tier 3 (Fair): 640-679 score → Limited lease options, money factor 0.0025-0.0030 (6-7.2% APR), require $2,000-3,000 down, co-signer may help.

Approval rate: 40%.

Below 640: Very difficult to lease from prime lenders.

Subprime leasing exists but rare and expensive (money factor >0.0035 = 8.4% APR).

Better to focus on buying with subprime auto loan.

Credit factors beyond score: (1) Income: Debt-to-Income <45% required (monthly debts / gross income).

Example: $4k/month income, $1,200 existing debt → Can afford $600 lease max. (2) Payment History: Recent delinquencies (past 12 months) disqualify even with good score. (3) Previous Lease History: Returning lease customer with clean record gets preferential treatment.

Improving approval odds: (1) Increase down payment: $3k+ down can offset 20-40 points of credit score. (2) Choose lower-priced vehicle: Easier to qualify for $350/month Civic than $550/month BMW. (3) Co-signer: Parent/spouse with 720+ can unlock Tier 1 rates. (4) Timing: End of month/quarter dealers more lenient to hit quotas. 2025 note: Electric vehicle leases (Tesla, Rivian) through manufacturer financing often have looser credit requirements (accept 680+) due to federal incentives.