What Each Year of Car Ownership Costs You To Buy vs. Lease, According to Humphrey Yang
Financial content creator Humphrey Yang broke down the true cost of car ownership in his YouTube video comparing buying versus leasing. The sticker price isn't your real cost, according to Yang. You need to run the numbers on what each year of ownership actually costs.
"The average car payment for a new car in America is over $750 a month or $9,000 a year in just payments," Yang said. "And that doesn't even include insurance, maintenance and gas."
Find out what each year of car ownership costs you to buy versus lease, according to Yang.
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The Buying Scenario
Yang used a Toyota RAV4 Woodland Edition starting at $39,900 as his example. That's $10,000 below the average new car price of $50,000 in 2026.
He assumed a prime credit score with 6.51% APR, a 20% down payment of $7,980 and financing for 72 months. That creates monthly payments of $537 or $38,664 over six years. Of that amount, $6,744 goes purely to interest.
But Yang said most people stop calculating there. That's a huge mistake because you also need insurance, maintenance and fuel costs.
Insurance runs $8,640 over six years based on estimates. Fuel costs just under $12,000 at $11,880 or about $165 monthly. Maintenance totals $7,272 over 72 months, according to Edmunds data.
The RAV4 holds its value well and retains 68% after six years. You can resell it for about $27,432. Add up all costs and subtract resale value and your total cost to own over six years is $47,033. That's $7,839 per year.
"Your sticker price on the Woodland RAV4 was $39,900 and you paid just over $7,000 extra over sticker to own the car outright over six years," Yang explained.
He called that pretty good in the car world but noted it could be much worse with different resale values.
The Leasing Scenario
Leasing means renting the car for three or four years with cheaper monthly payments and less money due at signing. You're basically paying for the car's depreciation over time.
Yang assumed two back-to-back three-year leases totaling six years. Money due at signing is $3,750 per lease or $7,500 total. Monthly payments are $450 for 72 months or $32,400 total.
Insurance and fuel costs stay the same as buying. Maintenance drops to zero because it's often covered with leases. Add everything up and the total is $60,420 over six years or $10,070 per year.
The key difference is no resale value since you turn the car back in. Leasing costs $2,231 more per year compared to buying. Over six years, buying saves you $13,386.
3 Scenarios That Change Everything
Yang outlined three situations where the numbers shift. First, keeping the car three years instead of six makes leasing more competitive. Buying still wins with the RAV4 because it holds 81% residual value after three years. But if residual value drops to 60% like many cars, leasing actually becomes cheaper by about $2,900.
Second, driving more than the standard 10,000 to 12,000 miles per year kills leasing economics. Overage fees run 15 to 25 cents per mile. Drive 18,000 miles yearly instead of 12,000 and you pay an extra $4,500 per lease in fees. Over two leases that's $9,000 added to your costs.
Third, interest rate changes matter significantly. Drop from 6.51% to 4.5% and you save $2,160 over six years. Jump to 8.5% and you pay an extra $2,448. Lower rates favor financing while higher rates make leasing relatively more attractive.
What Yang Would Do
Yang's first choice is buying a car in cash if the budget allows. He acknowledged comments saying to finance and invest the difference but disagreed at current rates.
"At the average interest rates of around 6.5% the decision is really close between just buying the car outright and investing the difference of that money," he said. The stock market averages 8% annually but he prefers a guaranteed return by avoiding the 6.5% loan cost.
If financing, Yang buys a reliable car that holds value like the RAV4. Finance with the shortest term possible. Then keep the car 10 to 12 years and drive it into the ground instead of six years.
"When you get to the point where you're done paying off your car, you want to take any extra money that would have gone towards your car payment and invest it instead," Yang said.
That's a wealth hack because no car payment frees up money for investments.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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