Auto Lease vs. Buy Calculator
Compare leasing and buying the same car over one shared horizon — every payment, the cash at signing, and the equity you still own at the end.
Vehicle price $42,000 · Comparison horizon 60 months · Loan down payment $5,000 · +7 moreYour figuresEdit figures
The negotiated price, not the sticker
Months both options are measured over — set it to how long you keep a car
Cash you put down to finance
The annual rate on the auto loan
Months of loan payments
Cap cost reduction and any due-at-signing cash
The payment on the lease quote
Months per lease — a shorter term than the horizon means a second lease
Charged each time you hand a leased car back
What the car you bought is worth at the end — your equity
Saved by the cheaper option
Buying is cheaper by $4,251 over this horizon, once the car you still own is counted.
Example figures — replace them with your own.
- Cheaper over this horizon
- Buying
- Loan monthly payment
- $741
- Lease monthly payment
- $489
- Monthly payment difference
- $252
- Net cost of buying
- $31,484
- Net cost of leasing
- $35,735
- Equity retained — buying
- $18,000
- Equity retained — leasing
- $0
Buying costs less over 5 years, after subtracting the equity left in the bought car. A second lease at the same payment is assumed after the first one ends.
| Scenario | BuyingBetter | Leasing |
|---|---|---|
| Cash up front | $5,000 | $6,000 |
| Monthly payment | $741 | $489 |
| Payments over the horizon | $44,484 | $29,340 |
| Disposition fees | $0 | $395 |
| Equity retained at the end | $18,000 | $0 |
| Net out-of-pocket cost | $31,484 | $35,735 |
Method: Net out-of-pocket cost over one common horizon, equity subtracted
- Both options are measured over the SAME horizon you enter. Buying is the down payment plus the loan payments made within that horizon, minus the car's value at the end less anything still owed on the loan.
- If the loan term ends before the horizon, payments STOP at the end of the term — no phantom payments are charged for the months you own the car outright.
- If the lease term is shorter than the horizon, a SECOND LEASE is assumed at the same monthly payment and the same cash at signing. Real lease terms change between contracts.
- The car's value at the horizon is YOUR estimate, not a market quote. It is the most uncertain input on the page and it is usually what decides the verdict.
- No sales tax, registration or licence fee is modelled, on either side. These vary by jurisdiction and no verified rate is used anywhere in this calculation.
- No mileage overage, no wear-and-tear charge, no early-termination penalty and no difference in maintenance, insurance or fuel between the two options is included.
- Figures are estimates for comparing two financing structures. They are not a quote, not an offer from any lender or manufacturer, and not financial advice.
No tax rates are used in this calculation.
This is an estimate, not financial or tax advice. Confirm figures with the linked source or a licensed professional before acting on them.
One horizon, and the equity you are left holding
Almost every lease-versus-buy comparison you will find is broken in the same two ways, and both of them happen to flatter leasing.
The first is the horizon. A three-year lease quote and a five-year loan quote are not comparable numbers, because they buy you different amounts of driving. Comparing each option "over its own term" is like comparing the price of a weekly bus pass to the price of a monthly one without noticing that one of them runs out first. This calculator refuses to do that. You pick a single horizon, and both scenarios are carried all the way to the end of it. If your loan is paid off before the horizon ends, the payments stop and nothing further leaves your account, but the car keeps depreciating in the meantime, so what it is worth at the horizon is what counts. If the horizon ends before the loan does, the loan is not finished and the outstanding balance is subtracted from the car's value, because equity is what you own minus what you still owe. And if the lease is shorter than the horizon, you cannot simply stop driving: a second lease is assumed at the same monthly payment and the same cash at signing. That assumption is a real one and it is stated rather than buried, because for a five-year horizon against a three-year lease it is worth thousands of dollars.
The second broken thing is equity, and it is the more expensive mistake. The cost of buying a car is not the sum of the payments you made. At the end of the horizon you still own something, and you can sell it. Take a car bought for forty-two thousand that is worth eighteen thousand five years later: eighteen thousand dollars of what you paid did not disappear, it turned into an asset sitting in your driveway. A calculator that adds up the loan payments and stops has just charged you for a car and then thrown it away. Leasing has no such line. When the lease ends you hand the keys back and your equity is precisely zero, which is not a criticism of leasing — it is the trade leasing offers. You pay only for the portion of the car you used, and in exchange you keep none of it.
That is why equity appears here as its own visible row on both sides of the comparison, sitting right next to a leasing figure of zero, rather than being quietly folded into a total. It is the single number that decides most of these comparisons, and you should be able to see it, argue with it, and change it. It is also the number you are least certain about, since nobody knows what a car will fetch in five years. Move it up and down by a few thousand and watch which way the verdict tips. If a small change in the resale value flips the answer, then the honest conclusion is that the two options cost about the same and you should decide on something other than money.
What a lease payment is actually made of
A lease payment is not a discounted car payment. It is two separate charges added together, and once you can see them apart, most of what feels mysterious about leasing stops being mysterious.
The first charge is depreciation. The lender works out what the car is expected to be worth when you hand it back — the residual value — and you pay for the difference between the price today and that figure, spread across the months of the lease. You are renting the part of the car that gets used up. This is why a car with a strong resale reputation leases well: a high residual means a small gap to pay for, and the monthly payment falls even though the price on the window has not moved an inch.
The second charge is interest, though the lease paperwork rarely calls it that. It is quoted as a money factor, a small decimal like 0.00275 that looks like nothing at all. Multiply it by 2,400 and you get the equivalent annual percentage rate — 0.00275 becomes 6.6%. That conversion is fixed arithmetic, not an estimate, and it is the single most useful thing to know when reading a lease quote, because a money factor is designed to be hard to compare against the loan APR sitting next to it. Do the multiplication before you decide anything. If the resulting rate is well above what you would be offered on a loan, the lease is charging you more to borrow, whatever the payment says.
Seen this way, a lease is a bet on the residual value, and the lender is on the other side of it. If the car is worth less than the residual when you return it, that is the lender's loss and not yours, which is genuine value on a model that depreciates unpredictably. If it is worth considerably more, that surplus was yours to capture and you handed it over with the keys. Buying is the same bet taken from the opposite side: you keep the upside and you carry the downside.
This also explains why the down payment on a lease deserves suspicion. A cap cost reduction lowers your monthly payment because it prepays part of the depreciation, but it buys you no ownership at all. If the car is written off early, the insurance settlement follows the vehicle's value, not the cash you put in, and unless you have gap coverage that prepaid money can simply be gone. That is the argument for putting as little down on a lease as you can tolerate — and for treating gap insurance, which pays the difference between the settlement and what is still owed, as close to mandatory rather than as an upsell to be waved away.
The costs that never appear on the quote
The monthly payment is the number the dealership wants you to compare, and it is the number that leaves the most out. The costs people are surprised by later are almost all on the leasing side, and they share a family resemblance: none of them are charged while you are driving, and all of them arrive at once when you hand the car back.
Mileage is the first. A lease sets an annual allowance, and every mile beyond it carries a per-mile charge that is agreed at signing and collected at the end. The rate looks trivial written down. It stops looking trivial when it is multiplied by a few thousand miles across a three-year term, and it is charged whether or not the extra driving affected what the car is actually worth. Before you sign anything, look up how far you genuinely drove last year rather than how far you think you drive. If you are close to the limit, buying the extra miles in advance is normally cheaper than paying the overage, and if you are far above it, the real comparison is not the one on the quote.
Wear and tear is the second, and it is more subjective. Returned cars are inspected against a standard for what counts as normal, and kerbed alloys, a windscreen chip, a scuff on a bumper or a stain on a seat can each become a line item. None of these would cost you anything on a car you own, because you would simply live with them or fix them when convenient. On a lease they are converted into cash at the moment of return, alongside the disposition fee that is charged for the privilege of taking the car back at all. This calculator includes the disposition fee explicitly, once for each lease you actually complete within the horizon, so a horizon that spans two leases carries two of them.
There is one more asymmetry worth naming, which is what happens when your circumstances change. Getting out of a lease early is generally expensive and awkward, because the contract is written around a fixed term. Selling a car you own is neither: you list it, you take the price, you pay off whatever remains on the loan. Neither this nor the wear-and-tear risk is modelled in the numbers above — they cannot be, without inventing figures. They belong on the leasing side of the ledger anyway, and you should weigh them there.
The answer mostly depends on how long you keep cars
Strip away the fees and the jargon and one variable does most of the work: how long you keep a car before you replace it.
If you replace your car every three years without fail, leasing and buying converge, and leasing can genuinely come out ahead. You are paying for the steepest part of the depreciation curve either way, and the lease at least spares you the trouble and uncertainty of selling. If you keep cars for eight or ten years, buying wins and it is not close. The loan ends, the payments stop entirely, and every year after that you drive a car that costs you nothing but fuel, insurance and maintenance while a leaseholder is still writing a cheque every month, forever. Push the horizon on this page out past your loan term and you will watch that effect appear in the numbers.
So set the horizon to the truth about yourself rather than to the term of the quote in front of you. Be honest about it. Someone who has traded every car at three years is unlikely to hold the next one for a decade, and someone who drives cars into the ground should not be modelling a five-year comparison. That single input moves the verdict more than any fee discussed on this page.
And when the numbers come out close, take that seriously as an answer in itself. Two figures within a few hundred dollars of each other, built on a resale value that is a guess, are not distinguishable. At that point decide on the things the arithmetic cannot hold: whether you want to own something at the end, whether an unpredictable repair bill would be a problem, whether you drive far enough to make a mileage cap a constant irritation, and whether you would rather have a newer car more often or no payment at all in year six.
Frequently asked questions
Is leasing cheaper than buying?
Over a short horizon it often is, and over a long one it almost never is. The reason is that a lease payment covers only the depreciation you use plus interest, so it is smaller month for month, but it never stops. Buying costs more per month and then stops entirely when the loan ends, and it leaves you holding a car you can sell. Set the horizon on this page to how long you actually keep a car and the comparison will answer the question for your situation rather than in the abstract.
What is a money factor and how do I turn it into an interest rate?
A money factor is how the interest portion of a lease is quoted: a small decimal such as 0.00275 rather than a percentage. Multiply it by 2,400 and you get the equivalent annual percentage rate, so 0.00275 is the same cost of borrowing as 6.6% APR. The conversion is exact arithmetic, not an approximation. Do it before you compare a lease against a loan, because a money factor is deliberately not in the same units as the APR printed beside it, and that difference in units is where an expensive lease hides.
Why does the calculator subtract the car's value from the cost of buying?
Because at the end of the horizon you still own the car and you can sell it, so that value is not a cost you incurred. Adding up loan payments without subtracting it charges you for the vehicle and then pretends it vanished, which overstates the cost of buying by many thousands of dollars and makes leasing look far better than it is. The equity line is shown explicitly on both sides of the comparison, next to a leasing figure of zero, because that contrast is the actual trade you are being asked to price.
What happens if my lease is shorter than the comparison horizon?
The calculator assumes you sign another lease at the same monthly payment and the same cash at signing, and it charges a disposition fee for each lease you actually complete. That is the standard simplifying assumption, and it is stated plainly because it matters: comparing a three-year lease against a five-year loan without accounting for those extra two years would compare five years of driving against three. Real lease rates change between contracts, so treat the second cycle as an estimate rather than a quote you have been given.
Are mileage limits and wear-and-tear charges included in these numbers?
No, and they are the costs people most often forget. A lease caps your annual mileage and charges a per-mile fee beyond it, collected in a lump at return. Returned cars are also inspected against a normal-wear standard, so kerbed wheels, glass chips and interior damage can each become a charge, none of which would cost you anything on a car you own. Both fall on the leasing side of the ledger. Check your genuine annual mileage before signing, and treat the figures here as a floor for the leasing cost rather than a ceiling.
Should I put a large down payment on a lease?
Usually not. A cap cost reduction lowers the monthly payment by prepaying part of the depreciation, but it buys you no ownership whatsoever. If the car is stolen or written off, the insurance settlement is based on the vehicle's value rather than on the cash you contributed, so without gap coverage that prepayment can simply disappear. Gap insurance, which pays the difference between the settlement and the amount still owed under the contract, is worth treating as close to mandatory on a lease rather than as an optional add-on.
What does this calculator deliberately leave out?
Sales tax and registration, which vary by jurisdiction and are not modelled anywhere here; mileage overage and wear-and-tear charges; any difference in maintenance, insurance or repair costs between a newer leased car and an ageing owned one; and early termination penalties. The resale value is your estimate and nobody can know it in advance. Everything the model does assume is listed in the assumptions block above the article, so you can see exactly which simplifications the comparison rests on.