What this calculator compares
A lease and a loan both start with cash at signing and a monthly payment, so it's tempting to compare payments. That's misleading. When the lease ends you hand the car back with nothing. When you buy, you still own a car with some value, minus whatever is left on the loan. This calculator lines both up over the same number of months, the lease term, and counts that leftover value.
How it's calculated
Lease cost = down + fees at signing + payment × months + extra miles × overage charge + disposition fee
Buy cost = down + fees + loan payments made − (car's value at the end − loan balance at the end)
The cap cost here is the price minus your lease down payment. The residual is the lessor's estimate of the car's value at the end, set in the lease. Most states tax a lease payment monthly, so tax goes on the payment; for the purchase, tax is added to the price and financed. If you enter an investment return, every dollar paid out is grown at that rate to the end of the period, which is the opportunity cost of spending it.
Worked example
A $40,000 car, 7% sales tax, compared over 36 months, driving 12,000 miles a year.
- Lease: $3,000 down, $1,000 at signing, 58% residual, money factor 0.0025 (6% APR), 12,000 miles a year, $350 disposition fee. The payment is $571.20, and the total is $3,000 + $1,000 + $571.20 × 36 + $350 = $24,913.26.
- Buy: $3,000 down, $1,000 of fees, 7% for 60 months on $39,800 ($40,000 + $2,800 tax − $3,000). The payment is $788.09, so 36 payments come to $28,371.16. You'd still owe about $17,602, and the car is worth 58% of $40,000, or $23,200, so you have about $5,598 of equity. The net cost is $4,000 + $28,371.16 − $5,598 ≈ $26,773.17.
Leasing is $1,859.91 cheaper over these three years. Drive 15,000 miles a year instead and the 9,000 extra miles cost $2,250, which shrinks the gap to $390.09. Keep the bought car for several more years with no payment and buying usually pulls ahead.
When this doesn't apply
- The car's value at the end is a guess. Look up your model's expected value; our car depreciation calculator gives a rough figure.
- It doesn't count insurance, maintenance or repairs. Leases often require higher insurance limits, and a new leased car is usually under warranty.
- Excess wear and tear, early termination charges and any purchase option fee are left out. Ending a lease early can cost a lot.
- Some states tax the whole lease upfront or tax it differently. Check your state's rules.
For the payment on one option only, use the auto lease calculator or the auto loan calculator. To understand every term on a lease, read how leasing a car works.