Lease vs Buy Calculator
Compare the true cost of leasing versus financing a car over the same term, including the equity you'd build by buying and get back at resale.
Lease
Buy
Same term, two different financial shapes
Comparing a lease payment to a loan payment side by side is comparing two structurally different things — a lease payment covers only the vehicle’s depreciation over the lease term plus financing cost, while a loan payment is sized to pay off the entire purchase price. That’s why leases almost always look cheaper on a pure monthly-payment basis, and why that comparison alone is misleading: it ignores that financing leaves you with an asset worth real money at the end, while a lease leaves you with nothing to show for the payments beyond the use of the car. This calculator runs both scenarios over the identical term and credits the estimated resale value back into the buy scenario, so the comparison reflects net cost rather than just monthly cash outflow.
Why the resale value assumption does most of the work
The single input that most determines whether buying wins this comparison is the estimated resale value at the end of the term — a vehicle that holds value well makes buying look meaningfully better, while a vehicle prone to steep depreciation narrows or can even eliminate buying’s advantage. Get a realistic resale estimate for your specific make, model and trim rather than a generic guess; some vehicle categories (certain luxury and electric models in particular) have historically depreciated faster than others, which materially changes this calculator’s output even with identical loan and lease terms.
The lease costs that don’t show up in the advertised payment
Lease advertisements lead with the monthly payment, but the full cost of a lease includes items easy to overlook when comparing options: a disposition fee charged when you return the vehicle at lease-end (commonly a few hundred dollars), and potential excess mileage and excess wear charges if you exceed the lease’s mileage allowance or return the vehicle with damage beyond normal wear. Annual mileage allowances on leases commonly run 10,000-15,000 miles, with a meaningful per-mile charge for every mile over that limit — a driver who regularly exceeds a typical allowance should factor those overage charges into the comparison, since they can erase a lease’s apparent savings entirely for a high-mileage driver.
Why some people lease even when buying is cheaper
This calculator focuses on total dollar cost, but leasing has real non-financial appeal for some drivers that a pure cost comparison doesn’t capture: driving a newer vehicle more often (typically every 2-3 years), staying under warranty for the entire time you own the car (avoiding out-of-warranty repair risk), and avoiding the hassle of selling or trading in a vehicle at the end. These are legitimate reasons to choose leasing even when the math favors buying — the calculator’s job is making sure that choice is made with clear eyes about the actual cost difference, not obscured by comparing a lease payment against a loan payment as if they were the same thing.
Using this before you’re at the dealership
Run both scenarios with your actual numbers — the specific vehicle’s quoted lease terms and loan APR, not generic assumptions — before negotiating, since dealers often steer the conversation toward monthly payment alone, which favors whichever option (often leasing) has the lower sticker number regardless of total cost. See the auto loan calculator for a detailed breakdown of the financing side specifically, and the car affordability calculator to check that either option fits comfortably within your broader budget before committing.
How this is calculated
Lease total cost = down payment + (monthly payment × term) + disposition fee Buy net cost = down payment + (loan payment × term) − estimated resale value
Frequently asked questions
- Is it cheaper to lease or buy a car?
- It depends on the specific numbers — leasing typically has a lower monthly payment but builds no equity, while buying has a higher monthly payment (via loan or cash) but leaves you with a vehicle worth something at the end of the comparison period. Over the same term, financing usually comes out ahead in total cost once resale value is credited back, but leasing can still make sense for reasons beyond pure cost, like driving a new car more often or avoiding maintenance risk out of warranty.
- Why do leases have lower monthly payments than loans?
- A lease payment is based on the vehicle's depreciation over the lease term plus interest (called the "money factor"), not the full purchase price — you're effectively paying for the portion of the car's value you use, while a loan payment is sized to pay off the entire purchase price. That's why lease payments run lower for a similar vehicle and term, at the cost of never owning anything at the end.
- What are common lease costs people forget to budget?
- The disposition fee charged at lease-end for turning in the vehicle, excess mileage charges if you exceed the lease's annual mileage allowance (commonly 10,000-15,000 miles/year, with a per-mile overage charge), and excess wear-and-tear charges for damage beyond normal use — all of which can add real cost beyond the advertised monthly payment.
- Does buying always build more value than leasing?
- Generally yes over the comparison term, since financing leaves you with an asset (the vehicle) worth something at resale, while a lease returns the vehicle with no residual value to you. The exception is a vehicle that depreciates unusually fast, where the resale value credited back in the buy scenario shrinks enough to narrow or eliminate that advantage — this calculator's resale value input lets you test that scenario directly.