Lease vs Buy Car Calculator

How to use this calculator

Fill in the lease and loan details for the same vehicle and click Calculate to get a side-by-side cost breakdown.

Vehicle Price: The sticker price or negotiated purchase price of the vehicle. This is used as a reference point and to calculate break-even analysis.

Down Payment Difference: Enter the net difference in upfront cash between the two options. If the lease requires $2,000 at signing and the loan requires $5,000 down, enter $3,000 here. If they are the same, leave it at zero.

Lease Payment / Month: The monthly payment shown in your lease quote, not including insurance or fuel.

Lease Term: How many months the lease runs. Common values are 24, 36, and 48 months.

Loan Payment / Month: Your estimated monthly loan payment for purchasing the same vehicle. Use a loan payment calculator to compute this if you have not gotten a quote yet.

Loan Term: How many months you will be making loan payments.

Residual Value: The buyout price stated in the lease contract. This is what the dealer projects the car will be worth at lease end.

Expected Resale Value: What you expect the car to be worth if you own and sell it at the end of the comparison period. Consult Kelley Blue Book or Edmunds for realistic estimates.

The real arithmetic of leasing vs buying

Most lease vs buy comparisons stop at the monthly payment. That comparison is misleading because it ignores everything that happens to the money after the term ends.

When you lease a car, your payments cover only the depreciation on the vehicle plus a financing charge (the money factor, which is like an interest rate). At the end of the lease, you hand back the keys and have nothing. When you buy, your payments build equity in an asset. After the loan is paid off, you own a car outright.

The lease wins on monthly cash flow almost every time. A $35,000 car might lease for $400/month while the loan payment is $600/month. That $200/month difference looks compelling. But the lease-holder pays that $400 every month forever if they keep leasing. The buyer pays $600 for 5 years and then pays nothing for years 6, 7, 8 as the car keeps running.

The net advantage of buying is the difference between these two totals over the same time horizon.

Understanding the break-even month

The break-even month is the point in time when the cumulative cost of buying equals the cumulative cost of leasing. Before that month, the lessee has spent less money. After that month, the buyer has spent less.

Here is why the crossover happens: in the early months, the buyer is spending more each month ($600 vs $400 in our example). But at some point, the loan pays off and the buyer’s monthly cost drops to zero. Meanwhile, the lessee keeps paying every month. The cumulative lines cross at that point.

For most vehicle scenarios, the break-even falls somewhere between month 30 and month 72. If you plan to keep a car longer than the break-even point, buying wins financially. If you plan to switch cars before the break-even point, leasing may cost less over your actual ownership period.

The chart in this calculator shows both cumulative cost lines so you can see exactly where they cross. The intersection is your break-even.

The 10-year view changes everything

Short-term comparisons favor leasing. Long-term comparisons favor buying by a wide margin. The 10-year tab in this calculator shows why.

A person who always leases a $35,000 vehicle every 3 years, paying $450/month, spends $54,000 in lease payments over 10 years and owns nothing at the end.

A person who buys the same vehicle, pays it off in 5 years at $620/month, then drives it payment-free for another 5 years, spends about $37,200 in loan payments and owns a car worth maybe $8,000-$12,000 at year 10.

The 10-year net cost difference can easily exceed $25,000 in favor of buying and keeping. This is why financial advisors almost universally recommend buying over leasing for long-term cost minimization.

The difference of $26,800 is real money, and the calculation above uses conservative numbers. The gap widens with more expensive vehicles.

When leasing makes sense

Despite the long-term cost advantage of buying, leasing is genuinely the right choice in certain situations.

Business use with tax deductions. If you operate a business and can deduct the full lease payment as a business expense, the after-tax cost of leasing can be lower than buying. The tax math depends on your marginal rate and how much of the vehicle is business use. Talk to your accountant.

You always want the latest model. If technology, safety features, or the prestige of driving a newer car matters to you, leasing gives you a new car every 2-3 years with minimal hassle. You never worry about a depreciating asset or major repair bills.

Predictable low mileage. If your annual mileage is reliably under 10,000-12,000 miles and you live somewhere the car stays clean, you rarely incur lease penalties and always hand back the car in good shape.

You need lower monthly payments for cash flow reasons. If a tight budget means you need to keep monthly outflows low regardless of total cost, leasing gives you the lowest monthly number for a given vehicle. This is not the cheapest option overall but it may be the only option for some budgets.

When buying almost always wins

For most households in most situations, buying is the financially superior choice.

You drive more than 12,000-15,000 miles per year. Lease overage charges of 15-25 cents per mile add up fast. A driver logging 20,000 miles per year on a lease with a 12,000-mile allowance faces 8,000 miles of overage charges annually. At $0.20/mile, that is $1,600/year just in penalties.

You want to modify or customize the vehicle. Leases prohibit most modifications. If you want aftermarket wheels, a lifted suspension, tinted windows beyond a certain level, or custom audio, you need to own the car.

You plan to keep the vehicle long-term. Every year you keep a bought vehicle after the loan payoff is a year of nearly free transportation (minus maintenance). A 10-year-old reliable car that is fully paid off costs a fraction of leasing an equivalent new car.

You want to build equity and net worth. A car is a depreciating asset, but it is still an asset. Your owned car has a market value that offsets the cost of ownership. A leased car provides zero asset value.

Mileage penalties: the hidden lease cost

Nothing changes the lease vs buy calculation more dramatically than mileage overage fees.

Most leases come with annual mileage allowances of 10,000, 12,000, or 15,000 miles. Every mile over the limit costs 15-25 cents extra, and that fee is collected as a lump sum when you return the car. You cannot negotiate it down.

A driver putting 18,000 miles per year on a lease with a 12,000-mile limit accumulates 6,000 overage miles per year. At $0.20/mile, that is $1,200/year in overage fees, or $3,600 on a 3-year lease. Suddenly the lease that looked attractive at $400/month has a true all-in cost of $500/month.

When entering your comparison in this calculator, mentally add expected overage fees to the monthly lease payment if you are a high-mileage driver. The calculator will show you the true comparative cost.

The residual value matters more than most people realize

The residual value listed in a lease contract has an outsized effect on whether that lease is a good deal.

The residual is the dealer’s projection of the car’s value at lease end. A higher residual means lower monthly payments because you are financing less depreciation. A lower residual means higher monthly payments.

The residual also determines whether buying out the lease at the end makes sense. If the market value of the car at lease end exceeds the contractual residual, you can buy the car at the residual price and immediately sell it for a profit, or simply keep a car worth more than you are paying for it. This happened widely in 2021-2022 when used car prices spiked far above pre-COVID residuals.

When comparing lease vs buy options, input a realistic resale value in the Resale Value field rather than the residual value stated in the lease. The residual is what the dealer calculated. The true resale is what buyers will actually pay you for that vehicle.

Common mistakes in lease vs buy comparisons

Comparing monthly payments instead of total costs. The monthly payment comparison always favors leasing. Total cost comparison usually favors buying. Make sure you are comparing the right number.

Ignoring the down payment and drive-off fees. Lease deals advertised at $300/month often require $3,000-$5,000 at signing. This upfront cash effectively raises the true monthly cost. Calculate the true all-in monthly cost as: (monthly payment x months + upfront fees) / months.

Assuming you will sell the car for asking price. Resale value estimates should be conservative. Use the trade-in value, not the private sale value, unless you are confident you will sell privately.

Not accounting for lease-end fees. Most leases charge for excess mileage, excessive wear, and a disposition fee (typically $300-$500) if you do not buy the car or lease a new one from the same brand.

Forgetting that buying eventually becomes free. The entire lease vs buy calculation shifts fundamentally when you model years 6-10. Lease payments never stop. Loan payments do.

When leasing is the right financial choice

The lease vs buy comparison is not always one-sided in favor of buying. Leasing is genuinely the better financial choice in specific circumstances.

You drive under 12,000 miles per year. Leases with low mileage allowances (10,000-12,000 miles) have higher residual values and lower monthly payments. If your actual driving falls within the allowance, you avoid excess mileage charges entirely and benefit from the depreciation math.

You change vehicles frequently. Buying a car every 3 years means repeatedly selling a vehicle in the fastest depreciation phase (years 1-3). Leasing cycles you through vehicles at the manufacturer’s depreciation cost rather than absorbing the real-world resale loss yourself.

You need a specific payment. Leasing offers a lower monthly payment for the same vehicle, freeing cash flow for other purposes. If you invest the monthly payment difference (buying minus leasing) at a reasonable return, the total wealth outcome can favor leasing.

Technology and reliability are concerns. Electric vehicles and plug-in hybrids depreciate rapidly as battery technology improves. A 3-year lease lets you upgrade to significantly better range and technology every cycle without worrying about residual value on an aging battery.