Auto Lease vs Buy Calculator
Compare total cost of leasing vs buying a vehicle over the same period.
What this calculator does
This calculator compares the net cost of leasing a vehicle against buying it with a loan over the same period. Enter the vehicle price, your down payment, the monthly lease payment, the lease term, the residual value, and the auto loan rate, and it returns the total cost of each route with the buying side credited for the vehicle you still own at the end.
That last adjustment is what makes the comparison fair. Comparing a $499 lease payment against a $1,200 loan payment is meaningless, because one leaves you with nothing and the other leaves you with a car. The net cost columns put both routes on the same footing.
When to use it
Run it when a dealer presents lease and finance options on the same car, which is the moment the two monthly payments look most misleading. It is also the tool for testing how long you actually intend to keep the car: leasing and buying are close over three years and diverge sharply over eight, so the honest answer to that question decides the outcome more than any rate.
It is also worth running against your driving pattern. A lease with a 10,000-mile allowance and a 20,000-mile-a-year habit is not a cheaper option quoted differently — it is a more expensive option with the cost postponed to turn-in day. Add your projected excess mileage charge to the lease side before comparing.
Understanding the inputs
Vehicle price is the negotiated price, which is negotiable on a lease exactly as it is on a purchase — a fact dealers seldom emphasize, since lease conversations focus on the payment. Down payment on a lease is the capitalized cost reduction; a large one is generally unwise, because it is lost entirely if the car is totaled early.
Monthly lease payment and lease term in months come from the dealer's quote. Residual value is the projected worth at the end of the term, usually 50 to 60 percent of price on a three-year lease. Auto loan rate is what you would pay to finance the purchase instead — use a preapproval rather than the advertised rate.
How is this calculated?
Lease Total = Down + (Monthly × Term). Buy Total = Down Payment + Total Interest Paid. Compare net cost factoring in residual value ownership.
A worked example
Take a $42,000 vehicle. The lease is $499 a month for 36 months with $3,000 down, giving a total lease outlay of $20,964 and nothing owned at the end. Buying instead means financing $39,000 at 7 percent over 36 months, a payment of about $1,204, with total payments plus the down payment of roughly $46,351 — of which $4,351 is interest.
That looks far worse until you credit the car you own. If it is worth the $25,200 residual after three years, the net cost of buying is about $21,151 against $20,964 for the lease. Effectively identical over three years — and the buyer then owns a $25,200 car outright while the lessee starts a new lease.
Limitations and assumptions
The comparison excludes fees on both sides: lease acquisition and disposition fees, excess mileage and wear charges, sales tax treatment which differs sharply between leasing and buying by state, and dealer documentation fees. It also assumes the car sells for exactly the residual value, which the used market rarely obliges.
Insurance is usually higher on a lease because of the coverage minimums leasing companies require, and maintenance is lower because the car stays under warranty. Neither is modeled. Most importantly, the calculator compares one term. Extending the horizon to eight or ten years shifts the result decisively toward buying, and that horizon is the real question.
Common Questions
- Is leasing always more expensive than buying?
- Over a single three-year term the totals are often surprisingly close, because you are financing only the depreciation rather than the whole car. Leasing loses decisively over longer horizons: someone who leases continuously for twelve years never stops making payments, while a buyer who keeps a car for six years spends three of them payment-free.
- What is residual value and why does it matter so much?
- It is the value the leasing company projects the car will hold at the end of the term, and your payment is essentially the difference between the price and that residual, spread over the term plus finance charges. A high residual means low payments — which is why models with strong resale values lease well and depreciation-heavy ones lease badly.
- What is a money factor?
- The lease equivalent of an interest rate, quoted as a small decimal like 0.00250. Multiply it by 2,400 to convert to an approximate APR — 0.00250 becomes 6 percent. Dealers rarely volunteer it, so ask directly, because a marked-up money factor is one of the least visible ways a lease gets more expensive.
- What happens if I exceed the mileage allowance?
- You pay an excess mileage charge, typically 15 to 30 cents per mile. A 12,000-mile-a-year lease driven at 18,000 miles accumulates 18,000 excess miles over three years — at 20 cents that is $3,600 at turn-in. If you drive more than about 15,000 miles a year, leasing is usually the wrong structure.
- Can I buy the car at the end of a lease?
- Yes, at the buyout price stated in the contract, which is the residual plus a purchase fee. Whether it is a good deal depends entirely on the market — if used values have risen above the residual, buying out and keeping or reselling the car captures that difference. If they have fallen, hand it back.
- Which costs less if I plan to keep the car ten years?
- Buying, by a wide margin, and it is not close. The value of ownership comes almost entirely from the years after the loan is repaid. A car financed over five years and kept for ten delivers five payment-free years; the equivalent lease period involves three or four consecutive leases and continuous payments.
- Are lease payments tax deductible?
- For business use, yes — you can deduct the business-use portion of lease payments, subject to an IRS inclusion amount on higher-value vehicles. Personal leases are not deductible. Buyers using a vehicle for business have a different set of options including depreciation and Section 179, so the comparison changes materially for business owners.
- What is gap insurance and do I need it on a lease?
- It covers the difference between what the insurer pays if the car is totaled and what you still owe. Most leases include it, and most auto loans do not. On a purchase with a small down payment and a long term, that gap can run several thousand dollars in the first two years — worth checking rather than assuming.