Lease vs Buy Calculator
Leasing is cheaper by $3,684.
| Over 36 months | Lease | Buy |
|---|---|---|
| Money down | $2,000 | $2,000 |
| Monthly payment | $455.33 | $721.26 |
| Total paid over the period | $18,392 | $27,965 |
| What you own at the end resale minus loan balance | Nothing | $5,890 |
| Net cost | $18,392 | $22,076 |
Leasing comes out $3,684 ahead over 36 months on these numbers. That usually means either a strong residual, a subsidised money factor, or a resale value assumption on the buy side that is pessimistic — try adjusting the resale figure and see how quickly it flips.
The comparison that matters is net cost, not monthly payment. A lease payment is almost always lower, because you are only paying for the depreciation you use rather than the whole car — but at the end of a lease you own nothing and start again, while a purchase leaves you an asset. This calculator credits the buyer with their equity: resale value minus whatever is left on the loan. The single input that swings the result most is the resale value, and it is the one nobody can know in advance — try it both optimistically and pessimistically before deciding. Not modelled: the disposition fee at lease end, mileage overage charges (typically 15–25¢ a mile beyond the allowance), maintenance differences over a longer ownership period, and the fact that a lease keeps you permanently in payments while a purchase eventually does not. If you keep cars for a decade, buying wins on almost any assumption.
Compare the true cost of leasing against buying the same car over the same period — with the equity you keep when you buy counted properly.
How to use this calculator
- Enter the negotiated price and MSRP once — both sides price the same car.
- Set the comparison period, normally the lease term.
- Fill in the lease terms — money down, fees, residual, and APR (money factor × 2,400).
- Fill in the purchase terms — down payment, fees, APR, and loan term.
- Enter the resale value you expect at the end of the comparison period. This is the input that matters most; try it high and low.
The formula
Lease net cost = (Payment × Term) + Money down · Buy net cost = Down + (Payment × Term) − Equity
Equity = Resale value − Remaining loan balance
Why payments are the wrong comparison
A lease payment is almost always lower than a loan payment on the same car, and that fact persuades a great many people to lease. But the payments are not buying the same thing.
Over three years on a $37,000 car with a 58% residual, the lease has you paying for about 42% of the car's value. The loan has you paying for 100% of it. The lease payment is lower because it is a smaller purchase, not because it is better value — and at the end of the lease you have nothing, while the buyer has a car worth roughly $23,000 against a loan balance of perhaps $15,000.
That equity is the whole argument, and it is why this calculator subtracts it. Compare net cost and the picture changes considerably.
The horizon changes the answer
Over one three-year term the two are often close. Extend the horizon and they diverge sharply, because a loan ends and a lease does not:
| Horizon | Leasing | Buying |
|---|---|---|
| 3 years | One lease, hand it back | Still paying, own equity |
| 6 years | Two leases, hand it back | Loan paid off, own the car outright |
| 9 years | Three leases, hand it back | Three years of no payments at all |
| 12 years | Four leases, hand it back | Six years of no payments; car still worth something |
The years after a car loan is repaid are the cheapest motoring most people ever do, and a lease never reaches them. If you keep cars for a decade, buying wins on virtually any assumption. If you replace a car every three years regardless, the gap narrows to almost nothing and the decision becomes about preference.
What tips it toward leasing
- A subsidised money factor or inflated residual. Manufacturers use both to move specific models, and when they do, a lease can genuinely beat buying.
- A car that depreciates hard. Leasing hands that risk to the lessor, which is worth real money on a model with weak resale.
- Business use, where lease payments may be deductible in ways a purchase is not. Ask an accountant rather than a dealer.
- Wanting a new car every three years anyway. If that is the plan regardless, leasing is simply the cleaner mechanism for it.
What tips it toward buying
- Keeping cars a long time. The single biggest factor.
- High mileage. Lease allowances are typically 10,000–15,000 miles a year, and overage runs 15–25¢ a mile.
- Wanting to modify the car, or not wanting to worry about returning it in prescribed condition.
- Preferring to eventually have no car payment at all.
What this does not model
Disposition fees, excess mileage charges, and wear-and-tear assessments at lease end; maintenance differences over a longer ownership period, which favour leasing since a lease usually stays inside warranty; and the opportunity cost of capital tied up in a purchase. It also assumes you buy the same car you would lease — in practice many people lease a more expensive car than they would buy, which is itself a cost the arithmetic never shows.
How we calculate this
Both sides are priced over the same window. The lease side is the full lease cost: monthly payments including tax, times the term, plus money down. The buy side is the down payment plus payments made during the window — which may be shorter than the loan term — less the equity you hold at the end, calculated as resale value minus the remaining loan balance. Net cost is what the comparison turns on, because a lease leaves you nothing and a purchase leaves you a car. Both use the same negotiated price and sales tax rate so the comparison is like for like.
Sources
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Frequently asked questions
Is it cheaper to lease or buy a car?
Over a single 36-month term they are often close, and leasing sometimes wins outright when the residual is strong or the money factor is subsidised. Over any longer horizon buying wins clearly, because a purchase eventually ends in a paid-off car while leasing keeps you permanently in payments. The comparison turns almost entirely on how long you keep cars.
Why is a lease payment lower than a loan payment?
Because you are only paying for the depreciation you use, not the whole car. A three-year lease on a car with a 58% residual has you paying for 42% of its value; a loan has you paying for 100% of it. The lower payment is not a discount — it is a smaller purchase.
What should I compare, the monthly payments?
No. Compare net cost: total paid over the period, minus whatever you own at the end. A lease leaves you with nothing, so its net cost is everything you paid. A purchase leaves you a car, so its net cost is the payments minus the car's value less any remaining loan balance. Comparing payments alone always flatters the lease.
When does leasing actually make sense?
When you want a new car every two or three years regardless, when you drive predictably within a mileage allowance, when the manufacturer is subsidising the money factor or inflating the residual to move a model, or when a business can deduct the payments. Also when the car is one that depreciates unusually hard — you are handing that risk to someone else.
When does buying make sense?
Almost always if you keep cars beyond the loan term. The years after a loan is paid off are the cheapest motoring you will ever do, and leasing never reaches them. Buying also wins if you drive a lot of miles, want to modify the car, or dislike the constraint of returning it in a prescribed condition.
What is the biggest unknown in this comparison?
The resale value at the end. It is the single input that swings the result most and the one nobody can know in advance. Run the calculator with an optimistic and a pessimistic figure — if the answer flips between them, the honest conclusion is that the two options are close and the decision should turn on preference rather than arithmetic.
Does leasing include maintenance?
Not usually, though a lease often runs entirely within the factory warranty period, which covers repairs but not routine servicing, tyres, or brakes. That is a genuine advantage over keeping a car eight years, where you meet the expensive maintenance that arrives after the warranty ends. It is worth weighing, but it is not the same as maintenance being included.
Can I buy the car at the end of a lease?
Yes — the residual is the contractual buyout price, and there is usually a purchase option fee. If the car is worth more than the residual at lease end, buying it is straightforwardly good value and you can sell it immediately for the difference. If it is worth less, hand it back; that is exactly the risk you paid the leasing company to carry.