Car Lease vs. Buy Calculator
Determine the total cost of leasing versus buying a vehicle. Estimate monthly payments, total interest, and long-term savings to make the smarter financial decision.
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Understanding Car Lease vs. Buy Analysis
The fundamental difference between these two options comes down to Usage vs. Ownership. Leasing is essentially renting a vehicle for a set period, paying for the depreciation you use during that time. Buying, or financing, involves paying off the entire purchase price plus interest to eventually own the asset outright.
Choosing the wrong option can cost you thousands of dollars in unnecessary depreciation or interest. An auto financing decision should be based on your total vehicle acquisition cost, not just the monthly payment amount. Just like renting versus owning a home, the "cheaper" monthly option isn't always the best financial decision in the long run.
Critical Factors in Lease vs. Buy Calculations
Money Factor
The lease equivalent of an interest rate. To compare it to a standard loan, multiply the Money Factor by 2400 to get the approximate APR. A lower money factor reduces monthly lease payments significantly.
Residual Value
The car's predicted value at lease end. This is set by the bank and cannot usually be negotiated. A higher residual value equals lower depreciation costs, resulting in a lower monthly lease payment.
Negotiated Price (Cap Cost)
The actual selling price of the vehicle, not the Sticker Price (MSRP). Always negotiate this price first. A lower negotiated price reduces both lease payments and loan principal.
How the Lease vs. Buy Calculator Works
We use transparency in our math to help you trust the results. The calculator separates the logic for auto loan amortization (buying) from the depreciation and rent charges (leasing).
Buying Logic (Amortization)
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Total Monthly Payment
- P = Principal (Loan Amount)
- i = Monthly Interest Rate (APR / 12)
- n = Number of Months
Leasing Logic (Depreciation + Rent)
Payment = Dep. Fee + Rent Fee
Formulas:
- Dep. Fee = (Negotiated Price – Residual) / Term
- Rent Fee = (Negotiated Price + Residual) × Money Factor
We sum all payments, fees, and taxes to provide a 'Total Cash Outflow' comparison. Tax assumptions (tax on monthly payments) follow common standards but vary by state.
How to Use This Calculator
To get accurate data for your inputs, you may need to look at a sales contract or lease agreement. Follow these steps:
- Check the window sticker for the vehicle's MSRP.
- Find the "Money Factor" on your lease offer sheet (often labeled as "Rent Charge" or "Factor"). If only an APR is given, divide by 2400.
- Negotiate the price first, then enter the "Negotiated Price" (Cap Cost) into the tool, not the MSRP.
- Compare the "Net Cost Difference" result to see the financial winner.
Pro Tip
Dealers often quote low monthly payments to hide high costs. Always ask for the Money Factor and Residual Value to verify their offer with this tool.
Interpreting Your Lease vs. Buy Results
The "Net Cost Difference" is the most important metric. It tells you exactly how much more one option costs than the other over the specific term.
If Buying is Cheaper (Negative Difference)
You pay less overall in total cash outflow, but your monthly commitment is usually higher. You own the asset at the end, which means you have a car to sell or trade-in. This builds equity over 7+ years.
If Leasing is Cheaper (Positive Difference)
You have lower monthly payments and no long-term commitment, but you own nothing at the end. This option favors cash flow preservation rather than net worth accumulation. You must return the car or buy it out.
Note on "The Equity Trap": Buying often shows a higher "Total Cost" because you are paying off the full asset price. However, if you sell the car later, the resale value effectively reduces your net cost.
Lease vs. Buy: Feature Comparison
| Feature | Lease | Buy |
|---|---|---|
| Monthly Payment | Lower | Higher |
| Ownership | No (You return the car) | Yes (You keep the car) |
| Mileage | Limited (e.g., 10k-15k/year) | Unlimited |
| Maintenance | Warranty covered mostly | User pays after warranty expires |
| Customization | Not allowed | Allowed |
Use this table to factor in non-financial preferences alongside the cost analysis.
Hidden Factors Affecting Your Decision
Beyond the calculator, external variables can sway the math significantly.
- Depreciation Rate: Cars that lose value fast (Luxury, EVs) are often better to lease because you aren't paying for that steep drop in value.
- Interest Rates: 0% APR financing deals or low-interest auto loans almost always beat leasing costs.
- Lifestyle: If you drive over 15,000 miles a year, lease penalty fees (usually $0.15-$0.30/mile) might make buying significantly cheaper.
- Gap Insurance: Often included in leases automatically but is an extra cost for buyers if the car is totaled.
When to Lease vs. Buy: Real Scenarios
Scenario A: The Tech Worker with a Luxury Car
Always wants the latest technology and status symbol. Lease allows them to upgrade every 3 years without worrying about depreciation hits or outdated tech.
Scenario B: The Family Minivan
Needs a vehicle for longevity and accumulating school-run miles. Buy is better here to avoid mileage penalties and to have a paid-off car for the long term.
Scenario C: The Small Business Owner
Uses the vehicle for work. Lease is often preferred for potential tax deductions on the monthly payment (consult a tax professional).
Limitations of This Calculation
Important Disclaimers:
- Buy Calculation: We assume you keep the car until the loan is paid off. We do not subtract the resale value of the car at the end of the loan (which would lower the effective cost of buying).
- Lease Calculation: We assume standard wear and tear. Excess mileage or damage will increase your cost upon return.
- Tax Laws: Tax treatment varies by state (e.g., taxing on total price vs. monthly payment). Verify your local sales tax rules.
Frequently Asked Questions
Sources & References
Our calculator algorithms and definitions are verified by industry standards and official consumer protection guidelines.
- Federal Trade Commission (FTC) - Consumer Information on Vehicle Leasing
- Consumer Financial Protection Bureau (CFPB) - Auto Loans resources
- Investopedia - Amortization schedule definitions
About the Author
Nithya Madhavan
Web developer and data researcher creating accurate, easy-to-use calculators across health, finance, education, and construction and more. Works with subject-matter experts to ensure formulas meet trusted standards like WHO, NIH, and ISO.