# Car Lease vs Buy Calculator Compare monthly car lease payments against purchase financing costs to decide which option saves you more money overall. --- - **Canonical URL:** https://dothecalculation.com/calculators/lease-vs-buy-calculator - **Category:** Financial calculators - **Publisher:** Do The Calculation (https://dothecalculation.com) - **Cost:** Free, no account or sign-up required - **Privacy:** Runs entirely in the browser; inputs are never sent to a server - **Methodology:** https://dothecalculation.com/methodology - **Reviewed by:** Dr. Thomas Wright, PhD, PhD in Real Estate & Urban Economics, Wharton School (https://dothecalculation.com/about/team/thomas-wright) --- ## Car Lease vs Buy Calculator — Total Cost Comparison Model the true financial cost of leasing a car versus buying it with financing, comparing monthly payments and net ownership equity. - Total financing and lease cost summaries - Break-even depreciation modeling - Net ownership equity comparison ## Leasing vs Buying: The Fundamental Trade-off When acquiring a new vehicle, the primary financial choice is between leasing and buying. Leasing is essentially renting the vehicle for a fixed term (typically 36 months). You pay for the vehicle’s expected depreciation during that term, plus a finance charge (known as the money factor). At the end of the lease, you return the car. Buying means you own the vehicle. If you finance the purchase, your monthly payments pay down the principal balance of the loan. When the loan is paid off, you own the asset outright. Buying typically has a higher monthly payment, but you build equity over time, whereas leasing has a lower monthly payment but leaves you with zero asset value at the end of the term. ## How to Use This Calculator Enter the car price, your planned down payment, the lease term in months, the lease monthly payment, the lease acquisition fee, and the lease-end residual value, plus the interest rate you would pay if financing a purchase instead. The calculator totals the full out-of-pocket lease cost (down payment, monthly payments, and fees) and separately totals the buy cost net of the car's resale value at the end of the same term, so you can compare both paths on equal footing. ## Worked Example: $35,000 Car, 36-Month Comparison Car price $35,000, down payment $5,000, lease term 36 months, lease payment $380/month, acquisition fee $695, residual value $18,000, buy interest rate 5.5%. Lease total cost: $5,000 (down) + ($380 × 36) + $695 (fee) = $19,375. Buy monthly payment on the $30,000 financed balance at 5.5% over 36 months: ≈ $905.88. Buy total cost: ($905.88 × 36) + $5,000 (down) ≈ $37,611.57. Buy net cost (after subtracting the car's resale value): $37,611.57 − $18,000 = $19,611.57. In this example, leasing costs about $236.57 less than buying net of resale value over the same 36 months — close enough that the decision could easily flip with a different residual value estimate, interest rate, or down payment, which is exactly why running your own numbers before committing matters. ## The Mathematics of Auto Lease and Loan Costs To calculate a monthly lease payment, the formula splits the payment into depreciation and finance (money factor) parts: $$\text{Monthly Lease Payment} = \text{Monthly Depreciation} + \text{Monthly Rent Charge} + \text{Monthly Tax}$$ $$\text{Monthly Depreciation} = \frac{\text{Net Cap Cost} - \text{Residual Value}}{\text{Term (Months)}}$$ $$\text{Monthly Rent Charge} = (\text{Net Cap Cost} + \text{Residual Value}) \times \text{Money Factor}$$ Where the money factor is approximately equal to the annual interest rate (APR) divided by 2400. For a loan purchase, the monthly payment is calculated using the standard amortizing loan formula: $$M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1}$$ Where \(P\) is the loan amount (purchase price minus down payment), \(r\) is the monthly interest rate, and \(n\) is the term in months. The calculator projects both paths to compare the total out-of-pocket costs and ending equity. ## Residual Value and Depreciation Curves Residual value is the estimated value of the car at the end of the lease, typically expressed as a percentage of the MSRP. A higher residual value lowers your monthly lease payment because you are paying for less depreciation. However, it also means buying the car at the end of the lease will be more expensive. Vehicles depreciate rapidly in the first 3 years (often 40% to 50% of MSRP). If you buy, you absorb this depreciation directly. The calculator estimates this depreciation to project your car’s actual resale value at the end of the comparison period, giving you a true net cost comparison. ## Related Calculators If you decide to buy, confirm the purchase price fits your budget with the [car affordability calculator](/calculators/car-affordability-calculator), and get the exact loan payment with the [auto loan calculator](/calculators/auto-loan-calculator). ## Frequently asked questions ### What is a money factor in a lease? The money factor represents the interest rate on a lease. To convert the money factor to an approximate APR, multiply it by 2,400. ### Is it better to lease or buy a car? Leasing is better for those who want lower monthly payments and plan to get a new car every 3 years. Buying is financially superior in the long run because you build equity and eventually eliminate monthly payments. ### What happens at the end of a car lease? You can return the car (paying any excess wear or mileage fees), trade it in, or buy it outright for the pre-determined residual value. ### What is residual value? Residual value is the estimated resale value of the vehicle at the end of the lease term, established by the leasing company at the start. ### Does leasing have mileage limits? Yes. Leases typically limit mileage to 10,000, 12,000, or 15,000 miles per year. Exceeding this limit triggers charges (often 15 to 25 cents per mile). ### Can I negotiate a car lease? Yes. You can negotiate the purchase price (capitalized cost), trade-in value, down payment, and sometimes the money factor. ### What is capitalization cost? Capitalization cost (cap cost) is the selling price of the vehicle used to calculate lease payments. Negotiating a lower cap cost lowers your payment. ### Is a down payment required on a lease? No. Many leases offer "$0 down" options. Making a down payment (cap cost reduction) lowers your monthly payment but increases your financial risk if the car is totaled early. ### Which option builds equity? Buying a car builds equity as you pay off the loan. Leasing builds zero equity; you must return the car at the end of the term. ### How does depreciation affect the decision? If a car depreciates slowly, buying is usually much better. If a car depreciates very quickly, leasing might be safer as the leasing company absorbs the unexpected drop in value. ## Related concepts - **Money Factor** — The interest rate metric used to calculate lease rent charges, converted to APR by multiplying by 2400. - **Residual Value** — The contractually established value of a leased vehicle at the end of the lease term. - **Amortization** — The schedule of paying off a loan principal and interest over time. ## Related guides - [Car Lease vs Buy: Financial Analysis and Calculator](https://dothecalculation.com/blog/finance/car-lease-vs-buy-financial-analysis) — Compare leasing and buying a car using total lease cost, amortized buy cost, residual value, mileage limits, fees, and ownership tradeoffs. ## Related calculators - [Auto Loan Calculator](https://dothecalculation.com/calculators/auto-loan-calculator) — Estimate monthly car payments, total financing cost, and interest owed based on vehicle price, down payment, and loan term. - [Mortgage Calculator](https://dothecalculation.com/calculators/mortgage-calculator) — Calculate monthly mortgage payments including principal, interest, property taxes, PMI, and home insurance to budget your home purchase. - [Rent vs Buy Calculator](https://dothecalculation.com/calculators/rent-vs-buy-calculator) — Compare the long-term costs of renting versus buying a home, including ownership expenses, equity growth, and opportunity cost. - [Car Affordability Calculator](https://dothecalculation.com/calculators/car-affordability-calculator) — Find a realistic car budget based on your income, monthly expenses, and down payment to avoid overspending on a vehicle. - [Credit Card Payoff Calculator](https://dothecalculation.com/calculators/credit-card-payoff-calculator) — Plan exactly how long it will take to pay off credit card debt and calculate interest savings from higher monthly payments. - [Debt-to-Income Ratio Calculator](https://dothecalculation.com/calculators/debt-to-income-ratio-calculator) — Calculate your front-end and back-end debt-to-income ratio to see how mortgage lenders will evaluate your monthly debt against your income. --- _This tool is for educational purposes only. Compounding schedules, investment returns, inflation indices, retirement nest egg timelines, and asset appreciation targets depend on personal budget profiles, tax brackets, market volatility, and macroeconomic policies. Always consult a certified financial planner (CFP) or tax advisor before finalizing long-term investment strategies._ --- _Source: [Do The Calculation](https://dothecalculation.com/calculators/lease-vs-buy-calculator). Quote freely with attribution and a link to this page._