Car Lease vs. Buy Calculator

Lease vs. Buy: What's Really Cheaper?

Leasing typically offers lower monthly payments than buying, but you don't build equity and must return the car at the end. Buying costs more per month initially, but the payments stop once the loan is paid off and you own an asset with resale value. The right answer depends on how you use your car, how long you keep vehicles, and what you value.

Leasing makes sense if: you want a new car every 2–3 years, drive under the mileage limit, want lower monthly payments, and don't mind never owning the car. Buying makes sense if: you keep cars long-term, drive many miles, want to build equity, or frequently modify your vehicle.

Frequently Asked Questions

• What is the money factor in a lease?
  The money factor is the lease equivalent of an interest rate. Multiply it by 2,400 to get the approximate APR. A money factor of 0.00125 equals about 3% APR. Always ask the dealer for the money factor and compare it to financing rates.
• What happens if I exceed my mileage limit on a lease?
  Excess mileage charges typically run $0.15–$0.30 per mile over the limit. If you drive 3,000 miles over a 36-month lease at $0.20/mile, that's a $600 charge at turn-in. This calculator lets you input your expected annual mileage to factor in those costs.
• Is it ever better to lease than buy?
  Leasing makes sense if you: prefer always driving a new car, drive under the mileage limit (typically 10,000–15,000 miles/year), can deduct the lease as a business expense, or want lower monthly payments without a large down payment. Buying is usually better long-term since you build equity and have no mileage restrictions. Leasing costs more over a decade but can be the right choice in specific circumstances.
• What does residual value mean in a car lease?
  Residual value is the estimated worth of the vehicle at the end of the lease term, expressed as a percentage of MSRP. A higher residual value means lower monthly payments because you're financing less depreciation. Vehicles with strong resale values (many Toyotas, Hondas, trucks) tend to have higher residuals and are generally cheaper to lease. Residual value is set by the lender, not the dealer.

Leasing vs. Buying a Car

Leasing and buying solve different problems. When you lease, you pay only for the depreciation and interest during the term, which usually means a lower monthly payment and a new car every few years — but you never build ownership and you face mileage limits and wear charges. When you buy, your payments are higher, but once the loan is paid off you own an asset and can drive payment-free for years. This calculator compares the total cost of each path over the period you specify, so the decision rests on numbers rather than the showroom pitch.

Worked Example

Imagine a $35,000 car. A 36-month lease might run $400 a month — about $14,400 over three years — after which you walk away with nothing. Financing the same car over 60 months at 7% costs more per month, but after five years you own a vehicle still worth perhaps $17,000. Over a single three-year window the lease looks cheaper; stretch the comparison to six or nine years and buying pulls decisively ahead, because the owner eventually drives with no payment at all while the serial leaser keeps signing new contracts.

Which One Fits You

Leasing tends to suit drivers who value low payments and a new car every few years, drive predictable, modest mileage, and don't mind a perpetual payment. Buying suits those who keep cars a long time, drive high mileage, or want to build equity and eventually escape monthly payments. Watch the lease fine print: mileage caps (often 10,000–15,000 miles a year), per-mile overage fees, and end-of-lease wear-and-tear charges can erode the apparent savings. Enter your real mileage and ownership horizon above to see which option wins for your situation.

• Is leasing cheaper than buying?
  Monthly, usually yes. Over the long run, buying is typically cheaper because you eventually own the car and stop making payments, while leasing is a permanent expense.
• What happens if I exceed the mileage limit on a lease?
  You pay a per-mile overage fee, commonly 15–30 cents per mile, at lease end. High-mileage drivers often find buying more economical for this reason.
• Can I buy the car at the end of a lease?
  Usually yes, at a predetermined buyout price stated in the contract. Whether that's a good deal depends on how it compares to the car's market value at lease end.