Should you buy or lease?
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| Factor | Lease | Buy |
|---|---|---|
| Annual Miles | Under 12–15K | Over 15K |
| Ownership Goal | Drive new every 3yrs | Keep 5–10+ yrs |
| Monthly Cost | Lower payment | Higher, builds equity |
| Customization | None, must return stock | Full freedom |
| Tax (Business Use) | Potential business use deduction, if eligible; consult a tax advisor. | Potential depreciation or Section 179 deduction, if eligible; consult a tax advisor |
Mileage is the #1 trigger: if you drive over 15,000 miles/year, lease overage fees ($0.20–$0.30/mile) may erode all savings.
Consider buying instead.
- Sweet spot for leasing: 10,000–12,000 miles/year, techheavy vehicles (EVs, luxury) or business use
- Consider buying: you drive heavy miles, plan to keep 7+
years or want to build equity - Hybrid trigger: buy if interest rates are low enough that
total cost of ownership beats lease cycling
Understanding the money factor.
The money factor is the lease equivalent of an interest rate. Multiplying the money factor by 2,400 provides an estimated rate comparison, but is not an APR and may not measure the overall cost of the lease.
Example: Money factor 0.00125 × 2,400 = 3.0% APR
- Always ask the dealer for the buy rate money factor —
dealers mark it up for their profit - Verify against edmunds.com or leasehackr.com before walking in
Choosing the right term.
- 36 months is usually the sweet spot because factory
warranty may cover the full term - You typically want to avoid 39+ month leases: registration
renewal, maintenance plans and inspection costs fall inside
the term - 24-month leases offer maximum flexibility but may carry
higher monthly payments
Comparing vehicles side by side.
Secure, easy-to-use digital banking tools designed around real firefighter schedules, so you can manage your money anytime, anywhere, whether you’re on duty, at the station, or at home.
| Factor | Car A | Car B |
|---|---|---|
| MSRP | $65,000 | $68,000 |
| Residual % 52% 55% | 52% | 55% |
| Money Factor | 0.00125 | 0.00089 |
| Monthly Pmt | $850 | $820 |
Higher residual = lower depreciation cost = lower payment. Compare residuals, not just sticker prices.
GAP coverage: important on expensive cars.
- GAP (Guaranteed Asset Protection) covers the difference between what you owe and what your insurance company pays if the vehicle is totaled or stolen
- Some lease contracts include GAP or similar protection, but not all. Verify the coverage in writing before signing
- If a leased vehicle is stolen or declared a total loss, the insurance settlement may not satisfy every amount owed under the lease. Some leases include GAP protection or a GAP waiver; others do not
- Review the lease agreement, coverage limits, exclusions, deductible treatment, and cancellation/refund terms before purchasing separate coverage
- Compare GAP pricing through your credit union, insurer and dealer before signing. Dealer-sold GAP may cost (up to 200– 400%) more, so review the price, coverage and cancellation terms carefully
Key lease parameters to negotiate.
You can and should negotiate each variable independently, don’t
blend them into a monthly payment discussion
- Cap Cost: the selling price; negotiate this first like a cash purchase
- Cap Cost Reduction: your drive-off/down payment; keep low (at risk if car is totaled)
- Residual Value: set by the bank; not negotiable, but shop brands with strong residuals
- Money Factor: ask for buy rate; dealers can and do mark this up
- Acquisition Fee: $595–$995; sometimes waivable, always ask
- Disposition Fee: charged at lease end; negotiate a waiver upfront
- Mileage Allowance: negotiate 12K–15K/year; overage fees are $0.20–$0.30/mile
Worked Example (36-Month Lease)
Secure, easy-to-use digital banking tools designed around real firefighter schedules, so you can manage your money anytime, anywhere, whether you’re on duty, at the station, or at home.
| Item | Amount |
|---|---|
| MSRP | $65,000 |
| Negotiated Cap Cost | $66,500 |
| Residual (54%) | $37,800 |
| Depreciation/mo. | $797 |
| Finance Charge/mo. | $93 |
| Monthly (pre-tax) | $890 |
Money factor = .00089. Figures are rounded up to nearest dollar. Estimated base payment before taxes and fees. Actual lease terms, payments, taxes, fees and amounts due at signing will vary.