Lease vs Buy a Car Calculator
The lease quote, the loan, and how long you keep driving
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Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Planning estimate only. Enter complete, current figures and keep an appropriate buffer for irregular or unexpected expenses.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the negotiated price. The same figure is the lease's capitalized cost and the car's purchase price — which is why negotiating it matters as much on a lease as on a purchase.
- 02
From the lease worksheet, enter the residual value as a share of price, the money factor, the term, and the cash due at signing. Multiply the money factor by 2,400 to see the APR the quote never states.
- 03
Enter the mileage allowance, the cents charged per mile over it, and the miles you actually drive. Overage is the charge that turns a good lease into a bad one and it is not negotiable at hand-back.
- 04
On the buying side, enter your down payment, the loan rate and the loan term, then the years you will keep driving — that last field is what separates the two answers.
- 05
Read the verdict over your whole horizon, then the year-by-year table: leasing's running total, the cash you have paid buying, what the car is worth, and buying's net cost once the car you still own is credited back.
Formula
Lease payment = (price − residual) ÷ term, plus (price + residual) × money factor. The first part is the depreciation you are renting; the second is the finance charge, and the money factor × 2,400 is its APR. Lease cost over the horizon = the drive-off cash and acquisition fee at the start of every cycle, plus every monthly payment, plus mileage overage and the disposition fee at the end of each cycle. Buying cost = down payment + payments made + any loan still outstanding − what the car is worth, on a value curve compounding from the 41.8% five-year depreciation rate. The verdict is the difference between those two net figures at your horizon.
Example
A $42,000 car: a 36-month lease at a 57% residual and a 0.00225 money factor with $3,000 down, a 12,000-mile allowance and 25c a mile over it, against financing $33,600 at 6.39% over 69 months with $8,400 down, driving 13,500 miles a year for ten years. The lease payment is $650 — $502 of depreciation you are renting and $148 of finance, an APR of 5.40% against the loan's 6.39%. The loan payment is $583. Over the first 36 months leasing costs $28,621 all in, including a $1,125 overage bill and the $400 disposition fee, while buying has cost $16,646 net of the $30,353 the car is worth. Over ten years the lease runs 3.3 cycles at $3,695 of drive-off each and totals $97,359; buying totals $34,412 after crediting the $14,226 of equity still held. Buying is ahead by $62,947 — although on pure cash out the door, buying is the more expensive of the two until month 36.
Definitions
- Capitalized cost
- The lease's version of the purchase price. It is negotiable exactly as a purchase price is, and lowering it lowers the payment through the depreciation half of the formula.
- Residual value
- The lessor's forecast of the car's value at lease end, stated as a share of price. It sets the depreciation you pay for and it is the price at which you may buy the car out.
- Money factor
- The lease's interest rate expressed as a decimal. Multiply by 2,400 for the APR — 0.00225 is 5.40%.
- Drive-off
- Everything due at lease signing: the cash down payment plus the acquisition fee, and it is charged again at the start of every renewal.
- Disposition fee
- The charge for handing a leased car back at the end of the term. Typically a few hundred dollars, and payable on every cycle you do not buy out.
Good to know
A lease is a rental of depreciation, priced like a loan
The whole of a lease payment is two things added. The first is the depreciation you will consume: the negotiated price less the residual value, divided by the number of months. The second is a finance charge on money you are using but have not borrowed in the ordinary sense — the price plus the residual, multiplied by the money factor. On a $42,000 car at a 57% residual over thirty-six months with a 0.00225 money factor, that is $502 of depreciation and $148 of finance, a payment of $650. The money factor is simply an interest rate in disguise, and the disguise is the point. Multiply it by 2,400 and you have the APR — 5.40% here, against 6.39% on the loan a buyer would take. The 2,400 is not magic: the factor is a monthly rate, and the sum of price and residual approximates twice the average balance outstanding over the term, so twelve months times two times a hundred converts it. The reason lease worksheets quote 0.00225 rather than 5.40% is that a number written that way does not present itself as something you would argue about, when in fact it is set from your credit tier exactly as a loan rate is and is negotiable exactly as one. The same is true of the figure it multiplies. The capitalized cost is the purchase price, and the most common lease mistake is treating it as fixed because you are not buying — every dollar taken off it comes off both halves of the payment. Around the payment sit two fees that recur with every lease you sign: an acquisition fee of several hundred dollars at the start, and a disposition fee when you hand the car back.
The residual is the number to interrogate
The residual value is the lessor's own forecast of what the car will be worth to it at the end of the term, set before you sign and fixed for the duration. It does two jobs at once, and both are worth understanding before you argue about a payment. First, it determines how much depreciation you are charged: you pay for the distance between the price and the residual, so a generous residual makes the lease cheap and a mean one makes it dear, on the identical car. Second, it fixes the price at which you may buy the car when the term ends. That second job creates an option that costs you nothing and is routinely ignored. If the car is worth less than the residual at hand-back — the ordinary case — you walk away and the lessor absorbs the difference, which is genuine risk transfer and part of what a lease is for. If it is worth more, you hold a below-market purchase option, and buying out and reselling is money the lessor's forecast left on the table. That situation was widespread through the used-price spike of 2021-23, when leases written on pre-shortage forecasts matured into a market nobody had predicted. The residual is also where manufacturer marketing lives. A captive finance arm that wants to move a particular model can inflate the residual above what it truly expects, or cut the money factor below its cost of funds, or both — subvention, in the trade's language. It is why the same monthly payment can be a bargain on one car and poor value on another with no reference to the cars themselves. One thing the residual is not: a prediction of what you would get in a private sale. It is a wholesale forecast on the lessor's own basis, and it does not translate to retail resale figures.
Why the answer changes when you run it past one term
Depreciation is front-loaded, and that single fact decides the comparison. A three-year lease consumes precisely the front-loaded part of the curve and then returns the car so the next lease can consume the front-loaded part of another one. A buyer consumes it once and then drives a car that is barely depreciating at all. Over the first thirty-six months on these defaults, leasing costs $28,621 and buying costs $16,646 net of the $30,353 the car is then worth. Over ten years, leasing costs $97,359 and buying costs $34,412 after crediting the $14,226 of equity still held — a gap of $62,947 that keeps widening after that. Over that decade a thirty-six-month lease is signed about 3.3 times, each signing costing $3,695 of drive-off cash and acquisition fee, each hand-back a $400 disposition fee. The cash flows tell a different and more seductive story, which is why the two must be read separately. Buying costs more out of pocket than leasing for the first three years — $8,400 down against $3,695 of drive-off, after which the loan runs at $583 a month against the lease's $650 — and the month the ledger flips is month thirty-six, when the lease's renewal lands: the overage bill, the disposition fee and the next drive-off all in the same statement. From there the buyer's cash cost keeps falling and stops altogether when the loan ends, while the lease bills at the same rate forever. That is the shape of the thing. Leasing offers a lower payment and no end to it; buying offers a higher payment for a defined period and then nothing, plus an asset. A comparison run over one term sees only the first half of both curves.
Miles, wear, and the risks that are not in the payment
The mileage allowance is priced into the payment through the residual, which means unused miles are not a saving you failed to take — they are money already paid. An allowance far above your real driving buys a lower residual and therefore a higher payment, for nothing. Miles beyond the allowance are the opposite problem, and the charge is harsher than it looks because it stacks. Twenty-five cents a mile over the limit is on top of the fuel and maintenance the lessee is already paying, which on AAA's 2025 per-mile figures runs about 24 cents — so a mile past the allowance costs roughly twice what a mile in a car you own costs. At 13,500 miles a year against a 12,000 allowance, that is $1,125 at the end of every three-year cycle, not negotiable once the car is back, and cheaper to buy up front at signing than to settle at hand-back. Three further risks sit outside the arithmetic entirely. Excess wear is contractual and assessed at return by an inspector, against standards written by the lessor: a curbed wheel, a chipped windshield, tread below a stated depth. The bill arrives after you have surrendered the car and any leverage over it. Early termination is the one most people never price: a lease is not a subscription, and ending it early generally means the remaining payments plus a termination charge, less whatever the car brings at auction — where a financed car can simply be sold. And one running cost genuinely does not cancel between the two columns: lessors mandate liability limits above state minimums and often a lower comprehensive deductible, so the same car can cost more to insure leased than financed.
Frequently asked questions
Is it cheaper to lease or to buy?
Over one term they are usually close; over a decade, buying wins by a wide margin on most sets of numbers. On the defaults here, the first 36 months cost $28,621 leasing against $16,646 buying net of the car's value — and ten years cost $97,359 leasing against $34,412 buying, a gap of $62,947. The mechanism is structural: a lease charges you the steepest years of depreciation and then hands the car back so you start on a fresh set of steep years.
What is a money factor and how do I read it?
It is the lease's interest rate written as a small decimal. Multiply by 2,400 for the APR: 0.00225 is 5.40%. Lease worksheets quote the factor rather than the rate precisely because 0.00225 does not read as a number you would negotiate — and it is negotiable, set from your credit tier exactly as a loan rate is.
What is the residual value and why does it matter?
It is the lessor's forecast of the car's value at the end of the term, and it sets your payment: you pay for the depreciation between the price and the residual, plus a finance charge. A generous residual makes the lease cheap and a mean one makes it dear. It also creates the one lease-end option worth checking — if the car is genuinely worth more than the residual when the term ends, buying it out at that price and reselling is money the lessor left on the table.
How bad is going over the mileage allowance?
It is the single most avoidable cost in leasing. On the defaults, 13,500 miles a year against a 12,000 allowance at 25c a mile is $1,125 at the end of every three-year cycle — over $3,300 across a decade. The charge is not negotiable at hand-back, and buying the extra miles up front when you sign is cheaper. This is why leasing suits low-mileage drivers and punishes everyone else.
Why does the comparison subtract the car's value?
Because a lessee owns nothing at the end and a buyer owns a car. Comparing only cash paid flatters leasing for as long as the loan runs and then flatters buying forever after, which answers nothing. The net figure here is cash paid, plus any loan still owed, less what the car is worth — so at month zero it is exactly zero for a buyer, which is the honest starting point.
Does leasing ever win?
Yes, in three cases the arithmetic here can and cannot see. If you genuinely replace your car every three years anyway, leasing removes the transaction friction and the residual risk. If the manufacturer is subsidising the lease with an inflated residual or a below-market money factor, the lease is cheaper than the same car financed. And if the car is used in a business, the lease payment is often deductible where a purchase is depreciated instead. What it does not survive is a decade of driving the same car.
What does this page leave out?
Insurance, fuel, registration and routine maintenance are broadly the same whichever way you paid, so they cancel and adding them to both columns would change nothing. Three things that do not cancel are not modelled: wear-and-tear charges at hand-back, the early-termination penalty if your life changes mid-term, and the business deduction above. Price the first two as risks rather than as numbers.