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Lease vs buy a car

A lease usually has a lower monthly payment, but at the end you return the car and own nothing; a buyer pays more each month and keeps a car with resale value.

This calculator compares both over the lease term, counting the lease fees and mileage charges and subtracting the equity the buyer holds when the lease would end.

  • Formula and assumptions shown
  • Table and CSV export
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Inputs

The price you would pay to buy, including any taxes and fees you would finance.
Include any tax charged on each payment.
Capitalized cost reduction, acquisition fee and other upfront charges. Leave out the first monthly payment; every monthly payment is counted separately.
Disposition fee and any expected wear-and-tear charges.
What the car would be worth if bought, at the end of the lease term. The buyer keeps this value as equity.

Results update as you type. Amounts in USD. Rates are your own assumptions.

Result

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Assumptions used

Calculated result—

Enter your numbers to see an estimate.

Notes and methodology

What decides it

Depreciation
Both paths pay for the car’s loss in value. A lease builds it into the payment; a buyer absorbs it through the gap between the price and the resale value.
Financing cost
A loan charges interest on the amount borrowed. A lease charges a finance fee (the money factor) on the car’s value, which is built into the monthly payment.
Upfront and end-of-lease charges
Amounts due at signing, acquisition and disposition fees, and wear charges all raise the cost of leasing and are easy to leave out when comparing payments.
Mileage
Leases include a mileage allowance, commonly 10,000 to 15,000 miles a year, and charge per mile above it. Buyers have no limit, but high mileage lowers resale value.
How long you keep the car
Buying tends to look better the longer the car is kept, because loan payments stop while the car is still in use. This page compares the lease term only.

How it works

Formula

Buy net cost = down payment + loan payments during the lease term − (resale value − loan balance at lease end). Lease cost = due at signing + monthly payment × lease months + lease-end fees + excess miles × charge per mile.

Read the full methodology

Assumptions

  • The loan is fixed-rate with monthly payments at the annual rate ÷ 12; payments after the lease term are not counted.
  • The resale value you enter is the car’s value at lease end; the chart draws a straight line from price to that value.
  • Insurance, maintenance, registration, sales-tax differences and the return the down payment could earn elsewhere are excluded.
  • The lease is kept for its full term with no early termination charges.

Worked example

$35,000 car: 60-month loan at 7% versus a 36-month lease at $450

With $5,000 down, the $30,000 loan payment is $594.04. After 36 months the buyer has paid $26,385.29 and still owes $13,267.85, so a $21,000 resale value leaves $7,732.15 of equity and a net cost of $18,653.15. The lease costs $3,000 at signing, 36 payments of $450 and a $400 disposition fee, $19,600 in total. Buying costs less over the 36 months by $946.85.

Step by step

  1. Find the loan payment. $35,000 price − $5,000 down = $30,000 borrowed at 7% for 60 months: $594.04 a month.
  2. Add up the buyer’s cash over the lease term. $5,000 down + 36 payments of $594.04 = $26,385.29, using the unrounded payment.
  3. Find the equity at lease end. After 36 payments the loan balance is $13,267.85. A $21,000 resale value − $13,267.85 = $7,732.15 of equity.
  4. Net the buyer’s cost. $26,385.29 − $7,732.15 = $18,653.15. That equals $14,000 of lost value ($35,000 − $21,000) plus $4,653.15 of loan interest paid during the 36 months.
  5. Total the lease and compare. $3,000 at signing + 36 × $450 ($16,200) + a $400 disposition fee = $19,600. Buying costs less over the 36 months by $946.85.

How to read your result

The headline names the option that costs less over the lease term and by how much. The summary and results show the buyer’s net cost, the lease total, the loan payment, the buyer’s cash paid, the loan balance and equity at lease end, and any excess mileage charge.

Cash paid and net cost differ. In the example the buyer pays $6,785.29 more cash than the lessee over 36 months ($26,385.29 against $19,600) but holds $7,732.15 of equity, which becomes money only when the car is sold or traded at that value. The chart and monthly table show cost to date for both paths; the buyer’s line uses a straight-line drop in the car’s value, so only the final month is exact. At month 12, for example, the table shows a buyer net cost of $6,602.16 against $8,400 for the lease.

The comparison stops when the lease ends. Loan payments after month 36, the value of keeping the car longer, and the need for another car after returning a lease are all outside the result. Insurance, maintenance, registration, sales-tax differences, and interest the down payment could earn elsewhere are excluded.

What changes the result most

Resale value
Every $1,000 of resale value moves the buyer’s net cost by $1,000. At $20,000 instead of $21,000, leasing costs less by $53.15.
Loan rate
At 4% the loan payment is $552.50 and buying costs less by $2,987.15. At 10% the payment is $637.41 and leasing costs less by $1,160.06.
Mileage
3,000 miles over the allowance at $0.25 a mile adds $750 to the lease, and buying then costs less by $1,696.85.
Loan term
A 72-month loan lowers the payment to $511.47, but the balance falls more slowly: $16,564.71 is still owed at month 36, equity is $4,435.29, and buying’s advantage narrows to $622.36 because more interest is paid on the larger balance.

Questions

Is it cheaper to lease or buy a car?

Leasing usually has the lower monthly payment, but buying is often cheaper in total, especially when the car is kept after the loan is repaid. Over a single lease term the result depends on the resale value, fees, rates and mileage.

What is the difference between leasing and financing?

Financing is a loan to buy the car, so you own it and keep its value. A lease pays for the use of the car for a set term and mileage, after which you return it or buy it for the price in the contract.

What costs are easy to miss on a lease?

Amounts due at signing, acquisition and disposition fees, excess mileage charges and excess wear charges. The FTC and the Federal Reserve lease guide list these charges.

Can I buy my car at the end of a lease?

Many leases include a purchase option at a price set in the contract. Compare that price with the car’s market value at the time.

Can you lease a used car?

Some dealers and lessors offer leases on used vehicles, often certified pre-owned ones, although these are less common than new-car leases. The same comparison applies: enter the used car’s price, the lease terms, and its expected value at lease end.

What are the pros and cons of leasing a car?

Leasing usually brings a lower monthly payment and a newer car every few years, often within the manufacturer’s warranty period. The drawbacks are no equity at the end, mileage limits and per-mile charges, wear-and-tear and disposition fees, early-termination costs, and ongoing payments if one lease follows another. The Federal Reserve’s leasing guide explains each of these terms.

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Sources

These references explain the concepts behind the calculation. They do not endorse this site. Estimates leave out any cost or condition you did not enter.