A $90,000 luxury car costs around $1,600 a month to buy over five years, or roughly $1,100 a month to lease for three. The lease looks cheaper, and it is, month to month. But after three years the buyer owns a car worth perhaps $50,000, while the lessee owns nothing and needs another car.

The right answer depends on how you use cars, how long you keep them, and how much you value always driving something new. For luxury cars specifically, the maths is different from ordinary cars, because depreciation is brutal and technology moves fast.

How Leasing Actually Works

When you lease, you pay for the car's depreciation during the lease term, plus interest and fees, rather than the whole price. The leasing company sets a residual value, the predicted worth of the car at the end of the term, and your payments cover the gap between the price and that residual. A high residual value means lower payments.

At the end of the term you hand the car back, buy it at the residual value, or lease a new one. Most lessees simply hand it back and start again. You never build equity, but you also never worry about resale value, because that risk belongs to the leasing company.

The Case for Leasing a Luxury Car

Luxury cars lose value faster than ordinary cars, often dropping by half within three to five years. Leasing transfers that depreciation risk to someone else. If the car turns out to be worth less than predicted, that is the leasing company's problem, not yours.

Leasing also suits people who want a new car every two or three years. Luxury technology, from driver assistance to infotainment, changes quickly, and a leased car is always current. Maintenance is usually covered by the warranty for the whole lease term, so surprise repair bills are rare. And for business owners, lease payments are often partly tax-deductible, which can change the maths significantly.

The Case for Buying Instead

Buying wins if you keep cars for a long time. The monthly payments are higher, but once the loan is paid off you drive payment-free for years, and the car still has value when you sell it. Over eight or ten years, buying is almost always cheaper than leasing two or three cars in a row.

Buying also means freedom. There are no mileage limits, no charges for small scratches and dents, and no penalty for modifying the car. If you drive more than 15,000 miles a year, tow, or take the car off-road, a lease will punish you with excess mileage and wear charges that can run into thousands.

The Hidden Costs of a Lease

Leases come with limits that buyers never face. Most allow 10,000 to 15,000 miles a year, and excess miles cost 25 to 50 cents each. A 5,000-mile overage can add $1,500 to $2,500 to your bill. Damage beyond normal wear, from kerbed wheels to stained seats, is charged at the end of the term.

Ending a lease early is expensive, often costing most of the remaining payments. And the monthly payment advertised is rarely the real one: it usually excludes taxes, fees and a large upfront payment. Always compare the total cost of the lease, including the deposit and all fees, against the total cost of buying over the same period.

Who Should Choose Which

Lease if you drive under 12,000 miles a year, want a new car every three years, value warranty cover and predictable costs, or can deduct the payments through a business. It is the low-hassle option, and for many luxury buyers the hassle matters more than the money.

Buy if you keep cars for six years or more, drive high mileage, want to modify the car, or simply like owning things. Buy a two- or three-year-old luxury car and you get an even better deal: someone else paid for the steepest depreciation, and you get a nearly new car at a large discount.