For three years, the standard advice was simple: lease an EV, let the leasing company claim the $7,500 federal tax credit, and pocket the discount. That advice is now dead. The credits ended in the fall of 2025, manufacturers replaced them with their own cash on some models and not others, and lease programs in October 2026 range from nearly free money to quietly terrible. So the honest question is no longer "lease or buy?" It is "lease or buy this specific car, on this specific program, at your mileage?" Here is the math, model by model.
The One Big Beautiful Bill Act terminated all three federal clean vehicle credits for vehicles acquired after September 30, 2025: the $7,500 new EV credit (Section 30D), the used EV credit (25E), and the commercial credit (45W) that leasing companies had claimed and passed through as lower lease prices. The IRS confirmed the cutoff in its guidance of August 21, 2025. The effect showed up immediately. Edmunds measured EV lease penetration at 74.0 percent in September 2025 and 59.8 percent in October 2025, the first month without the credit, while the average EV transaction price jumped from $60,167 to $65,021.
The money did not vanish. It moved, from a universal federal credit to manufacturer cash that varies by model. Volkswagen now puts up to $12,500 of its own bonus cash on the 2025 ID.4 (and $6,000 on the 2026). Kia offers up to $10,000 customer cash on the EV9. Jeep and Ram are running lease money factors around 0.00012 to 0.00013, the equivalent of roughly 0.3 percent APR. Hyundai advertises residuals of 60 to 64 percent on the Tucson. None of this is a strategy. It is a per-model calculation, which is exactly how the rest of this post treats it.
Experian's State of the Automotive Finance Market for the second quarter of 2026 puts the average new vehicle lease payment at $617 a month and the average loan payment at $765. That $148 gap is the number lease advertising wants you to see, and it compares two different things. The average loan runs 69.5 months, finances $43,610 at 6.35 percent, and ends with the buyer owning an asset. The average lease runs about 36 months and ends with the driver owning nothing. A lower payment for a shorter right to use a car is not a saving; it is a smaller purchase. The only fair comparison is total cash out over the same period, against what each path leaves you holding. Here is that comparison on a real car.
Toyota's advertised lease on a 2026 RAV4 LE Hybrid AWD (total price $35,234) is $319 a month for 36 months with $3,999 due at signing, structured as $2,930 down, the first payment, and a $750 acquisition fee, with a lease-end purchase price of $27,130 and 10,000 miles a year. The finance alternative is Toyota's advertised 4.99 percent APR for 48 months. Run both for exactly 36 months:
| Lease it | Finance it | |
|---|---|---|
| Headline payment | $319/mo | $811/mo |
| Cash out in 36 months | $15,164 | $29,205 |
| Effective monthly cost | $421/mo | see below |
| What you hold at month 36 | Nothing (plus a $350 return fee) | $17,653 of equity* |
| Net cost of 36 months | $15,164 | $11,552 |
| Mileage limit | 10,000 mi/yr, $0.15/mi over | None |
*Equity uses the lease's own $27,130 lease-end value as the car's month-36 value, minus the $9,477 loan balance remaining. Taxes, title, and dealer fees are excluded from both columns, as both offers exclude them. The full finance picture: the 48-month loan totals $38,940 and ends a full year before a second lease would, with the car owned outright.
Two lessons fall out of this table. First, the $319 lease really costs $421 a month once the money due at signing is counted, and financing the same car comes out $3,612 cheaper over the same three years at equal vehicle value. What the lease buys for that $3,612 is insurance: the bank, not you, holds the resale risk, and you can hand back the keys. Second, the monthly headline is the worst way to compare two leases. A regional variant of this same RAV4 program advertises $379 a month with only $379 due at signing. All in, it totals $14,744, which is $770 cheaper than the $319 program. Due at signing beats the headline, every time.
Most leases include 10,000 to 12,000 miles a year, with overage charges typically between $0.15 and $0.25 a mile. Drive the RAV4 above at 18,000 miles a year, unremarkable for a rural New England commute, and the lease ends with 24,000 excess miles and a $3,600 bill, on top of the $15,164 already paid, for a car you do not own. If you drive more than about 12,000 miles a year, the lease-versus-finance question answers itself regardless of model: finance it.
A lease payment is mostly depreciation plus a finance charge, so the models that lose value fastest are the ones where ownership hurts most. iSeeCars' 2026 study of five-year depreciation puts the classes in this order:
| Class | Value lost in 5 years |
|---|---|
| Trucks | 34.2% |
| Hybrids | 35.4% |
| All vehicles (average) | 41.8% |
| SUVs | 44.9% |
| Electric vehicles | 57.2% |
At the model level the spread is wider. Kelley Blue Book's 2026 resale awards project the Toyota Tacoma to keep 63 percent of its value after five years, the Tundra 59.9 percent, and the 4Runner 58 percent, against an industry average of about 45 percent. At the other end, iSeeCars found the Volkswagen ID.4 losing 62.1 percent in five years, the BMW 7 Series 61.6 percent, and the Tesla Model S 62.0 percent. A high residual cuts both ways, by the way: it makes a lease payment smaller and it makes buying cheaper, because the owner keeps the equity. A lease only wins outright when the manufacturer's program is subsidized below what the car's real depreciation would cost, or when real depreciation is worse than anyone can predict. Which brings us to the sort.
Every placement below rests on a published figure: a stated residual or money factor from an October 2026 program, a KBB or J.D. Power ALG residual award, or iSeeCars depreciation data. Filter by the verdict:
71% stated residual
October 2026 deal analyses report a 0.00012 money factor (about 0.29% APR equivalent) and $2,000 of lease cash on the Rubicon X, on top of the 71% residual for a 24-month term. The bank is charging almost nothing for depreciation or money. Wrangler is also a J.D. Power ALG 2026 residual winner.
0.31% APR equivalent
A money factor of 0.00013 plus $1,750 of lease cash in October 2026 programs, per deal analyses of the Laramie 4x4. When the finance charge inside a lease is effectively zero, the lease is a subsidized rental, and subsidized rentals are worth taking.
60 to 64% advertised residual
Hyundai states residuals of 60 to 64 percent on October 2026 Tucson leases, with $750 of Lease Event Cash. A stated residual that high, on a mainstream SUV, is the manufacturer absorbing depreciation that iSeeCars says SUVs usually suffer (44.9% gone in five years).
$12,500 VW bonus cash
VW replaced the dead federal credit with up to $12,500 of its own money on the 2025 ID.4 ($6,000 on the 2026). The car itself loses 62.1% of its value in five years (iSeeCars). Take VW's cash, lease the car, and let VW hold the residual risk.
$10,000 customer cash
Up to $10,000 of Kia customer cash in October 2026, on a three-row EV in the worst-depreciating class on the market (EVs: 57.2% gone in five years). Kia is paying you to let it keep the depreciation. (Kia also offers a 0% APR purchase alternative; the lease wins because of the class, not the brand.)
$339/mo 24 months
Advertised nationally at $339 a month for 24 months with $4,999 due in October 2026. The short term is the point: two years caps your exposure to EV value swings while the post-credit market finds its level.
61.6% 5-year loss, 7 Series
Flagship luxury sedans are the worst way to spend new-car money as a buyer: the 7 Series loses 61.6% in five years and the A8 L 57.6% (iSeeCars). A lease caps your cost to a negotiated slice of that fall instead of the whole thing. Placement rests on depreciation data; compare programs store by store.
No. 1 KBB electric car resale
The exception among EVs: Model 3 won its J.D. Power ALG 2026 segment and KBB's Electric Car resale category. A strong projected residual keeps the depreciation charge inside a lease low, so it leases more honestly than its class. If you want an EV long term, it is also the most defensible one to buy.
63% kept after 5 years
KBB's number one resale vehicle overall, and an ALG winner. Leasing a Tacoma means paying to use the most retentive truck in America and handing its equity back to the bank at the end. Buy it, keep it, sell it well.
59.9% kept after 5 years
Second only to the Tacoma in KBB's overall top 10, and an ALG winner. Full-size trucks are the slowest-depreciating class on the road (34.2% five-year loss); ownership is where that advantage lands.
58% kept after 5 years
An ALG and KBB double winner in the off-road SUV category. Body-on-frame Toyotas hold value like few vehicles made; financing captures that, leasing donates it.
$3,612 saved vs. its lease
The worked example above. Hybrids are the slowest-depreciating powertrain class (35.4% five-year loss), and financing at Toyota's 4.99% beats the car's own advertised lease by $3,612 over the same 36 months at equal value.
ALG + KBB segment winner, both
Camry won its segment in both the J.D. Power ALG 2026 awards and KBB's 2026 resale awards. Cheap to buy, cheap to run, and valuable at trade-in time: the sedan case for financing is the same as the truck case, just smaller.
22.9% lost in 5 years
The Civic lost only 22.9% of its value in five years (iSeeCars) and won its segment in both residual award programs. There is no lease program generous enough to beat simply owning the most retentive compact car.
54.1% kept after 5 years
KBB top 10 overall for resale, remarkable for the cheapest truck sold in America. A vehicle that holds value this well at this price is a purchase, not a rental.
54% kept after 5 years
A KBB top 10 finisher and an ALG winner; iSeeCars measured only an 18.7% five-year loss. Sports cars are supposed to be the fun exception. The Corvette is the fun exception that is also a sound purchase.
ALG 2026 residual winner
J.D. Power's ALG award for its segment, from the brand that won the most model awards overall. Big three-row SUVs usually bleed value; this one is built on the Tundra's bones and behaves like it at resale.
54.3% kept after 5 years
KBB top 10 overall and the minivan resale winner. Families keep Siennas for a decade, which is precisely the ownership pattern financing rewards and leasing punishes.
Programs like the Wrangler and Ram ones above are not hypothetical. They are sitting on local specials pages in New England right now, and the totals show why the due-at-signing figure, not the monthly headline, is the number to compare. At Quirk Chrysler Dodge Jeep Ram of Boston, checked October 15, 2026: a 2026 Ram 1500 Big Horn leases at $245 a month with $4,739 due at signing over 42 months, a total of $14,784, and a 2026 Dodge Durango GT Plus leases at $269 a month with $4,763 due, a total of $15,792 over 42 months. At Quirk Volkswagen of Manchester, New Hampshire, a Jetta Sport advertises $119 a month, but with $5,617 due at signing over 39 months the real total is $10,139, an effective $260 a month, and the lease allows only 7,500 miles a year. That Jetta is still a genuinely cheap way to drive a new car if your miles fit. It is also the cleanest illustration in this post that the advertised payment is the least honest number on any lease page.
Massachusetts note: the state MOR-EV rebate still pays $3,500 on a new EV under $55,000, with income-qualified adders stacking to $6,000 and $7,500 for qualifying electric trucks, and it pays on a purchase or a lease equally. It is real money, but because it does not favor either path, it is not a reason to choose one. PHEVs are not eligible.
IRS, FAQs for modification of sections 25E, 30D, and 45W under Public Law 119-21 (FS-2025-05, August 21, 2025). Edmunds Insights, EV market data for September and October 2025. Experian, State of the Automotive Finance Market, Q2 2026. J.D. Power, 2026 ALG Residual Value Awards (January 20, 2026). Kelley Blue Book, 2026 Best Resale Value Awards (March 19, 2026). iSeeCars, five-year depreciation study, 2026. Capital One and Federal Reserve lease guidance on mileage allowances and overage charges. Toyota advertised lease and APR programs, and October 2026 lease deal analyses for Jeep, Ram, Hyundai, Volkswagen, and Kia programs, checked October 15, 2026. MOR-EV program pages, mor-ev.org, checked October 15, 2026. Quirk lease examples from dealer specials records, checked October 14 and 15, 2026. All figures require well-qualified credit where a program is cited, and programs change monthly.