Lease vs Buy Calculator

When you buy a car, you either pay cash or finance the full purchase price, and at the end of the loan you own the vehicle outright. When you lease a car, you pay only for the portion of the vehicle's value you consume during the lease term — typically two to four years. At the end of a lease, you return the vehicle (or purchase it at a pre-agreed residual price) and start fresh.

Leasing typically results in lower monthly payments than buying, because you are financing only the depreciation during the lease period rather than the entire vehicle price. However, leasing means you never build equity in the vehicle. Each lease cycle starts your costs over without any ownership asset to show for your payments. Over a 10-year horizon, most financial analyses show that buying and holding a vehicle long-term is less expensive than perpetually leasing.

The money factor is the lease equivalent of an interest rate. To convert a money factor to an approximate APR, multiply it by 2,400. A money factor of 0.00125 equals approximately 3% APR. Residual value is the projected worth of the vehicle at the end of the lease expressed as a percentage of MSRP — a higher residual means lower depreciation costs and lower monthly payments.

1. In the Lease section, enter the MSRP, negotiated capitalized cost, residual value percentage, money factor, lease term, down payment, and disposition fee.
2. In the Buy section, enter the purchase price, down payment, APR, loan term, and your expected resale value at the end of the comparison period.
3. Review the side-by-side monthly payment comparison.
4. Check the total cost and net cost figures — the net cost for buying subtracts the expected resale value.
5. Read the recommendation generated by the calculator to see which option is more cost-effective in your scenario.

Leasing makes the most financial sense when you drive fewer miles than the lease allowance, want a new car every 2–3 years, and can take advantage of tax deductions (such as business-use deductions for self-employed drivers). Leasing can also be attractive when special manufacturer incentives result in below-market money factors and high residual values.

Buying outright and keeping the vehicle for 8–10 years is typically the most cost-efficient approach over the long run. Once the loan is paid off, your monthly transportation costs drop significantly to insurance, fuel, and maintenance only. This period of ownership without a payment is where buying generates its greatest financial advantage over leasing.

Watch out for lease-end charges. Excess mileage fees (typically $0.15–$0.30 per mile over the limit), wear-and-tear charges, and disposition fees can add up to thousands of dollars at turn-in. Factor these potential costs into your total lease cost comparison, especially if you tend to drive more than the standard 10,000–12,000 miles per year limit.