Lease vs Buy Auto Calculator
Compare the true cost of leasing vs financing the same vehicle
Last updated: November 2025
Vehicle
Lease Terms
Residual value at lease end: $20,900
Buy / Finance Terms
Derived monthly payment: $738.19
Side-by-side comparison
| Component | Lease | Buy |
|---|---|---|
| Total monthly payments | $28,728 | $44,291 |
| Down payment(s) | $6,000 | $3,000 |
| Sales tax | $1,724 | $2,280 |
| Disposition / lease-end fees | $800 | $0 |
| Loan interest paid | included in monthly | $7,011 |
| Total cash out | $37,252 | $47,291 |
| Equity at end | $0 | + $18,000 |
| Net cost of ownership | $37,252 | $29,291 |
Cash Out, Equity, Net Cost
Understanding the Lease vs Buy Math
What You Actually Pay For in a Lease
A lease payment covers (1) the depreciation of the vehicle during your term, (2) interest on the capitalized cost (the "money factor"), and (3) sales tax in most states. You are essentially renting the value the car will lose. A $40,000 MSRP car with a 55% residual after 36 months will lose roughly $18,000 in value, which is what you finance, plus rent charge and tax. This is why monthly payments are lower than financing the full $40,000, you are not paying for the part of the car the lessor will sell at lease end.
Why Buying Wins Long-Term
Once you finish paying off a loan, every additional year of ownership is essentially payment-free (minus insurance, fuel, maintenance). If you keep a paid-off vehicle for 4 more years after a 60-month loan, you save $20,000 to $30,000 in lease or new-car payments. Over a 10 to 15 year ownership horizon, buying typically beats serial leasing by $20,000 to $40,000 per vehicle. The breakeven point usually sits around year 5-6, after that the buyer is well ahead.
When Leasing Can Make Sense
Leasing works when you need a new vehicle every 2-3 years (for image, work, or you simply prefer it), when business use allows large tax deductions, when you drive predictably under the mileage cap, when you want to avoid resale and maintenance hassle, or when manufacturer incentives temporarily push lease payments well below loan-equivalent. EVs are a special case, residual values are unpredictable due to rapid model improvement, and leasing transfers that risk to the captive lender.
Hidden Lease Costs
Watch for: (a) acquisition fee at signing ($595-895 typical), (b) disposition fee at lease end ($350-500), (c) excess mileage fees at 15-25 cents per mile (a typical 10k/yr cap with 13k/yr driving = $750/yr in fees), (d) wear-and-tear charges (dings, tire wear, interior wear), and (e) early termination, which is the worst, ending a lease in year 1 can cost $5,000+. Read the contract carefully.
Frequently Asked Questions
What are the main advantages of leasing?
Lower monthly payments (you pay only for depreciation, not the full price), a newer car every 2-3 years, vehicle stays under warranty the entire time, no resale hassle, and a more expensive car for the same monthly outlay.
What are the main advantages of buying?
You build equity, no mileage caps, freedom to modify the vehicle, payment-free years once the loan is paid off, and the resale value goes back to you. High-mileage drivers and long-term keepers almost always come out ahead by buying.
Should I choose 36, 48, or 60 month lease?
36 months is the sweet spot, the lease ends right before the manufacturer warranty (3 yr / 36k mi) typically expires so you avoid out-of-warranty repair risk. 48 and 60 month leases lower the monthly but push past warranty and increase out-of-pocket repair and wear-and-tear charges.
What is the money factor?
The money factor is the lease equivalent of an interest rate. Multiply by 2400 to get APR. A money factor of 0.00125 = 3.0% APR; 0.00250 = 6.0% APR. Always negotiate the money factor, not just the monthly payment, because dealers can mark it up.
What are my lease-end options?
(1) Return the vehicle, pay the disposition fee, walk away. (2) Buy out the lease at the contracted residual; if used-car prices have risen above the residual, this is a deal. (3) Extend month-to-month for a few weeks while you arrange the next car. Some dealers also accept lease vehicles as trade-ins.
Do I need gap insurance?
Most leases include gap insurance. On a financed purchase, gap is optional but recommended when your loan balance exceeds the vehicle's actual cash value, common in the first 2-3 years of a long-term loan with little down. Buy gap from your auto insurer or credit union, not the dealer, where it is usually overpriced.