Leasing and buying look similar on the monthly bill but are different deals. A lease payment covers only the part of the car's value you use up while you drive it, and at the end you hand the keys back. A loan payment covers the whole car; you pay more each month, but at the end you own something you can keep or sell. The honest way to compare them is to put both on the same footing: what does each option cost, net, over the same number of months? This calculator does that.
How to use the lease vs buy car calculator
- Enter the buying side: the price, your down payment, the loan APR and term, sales tax and fees.
- Enter what the car will be worth when the comparison period ends — the amount you could sell it for.
- Enter the leasing side: monthly payment, amount due at signing, lease term and the turn-in (disposition) fee.
- Compare the net costs and cost per month. The difference shows which choice is cheaper over the lease term.
To see how a lease payment itself is built, use the car lease calculator; for the loan side, the car payment calculator.
Lease vs buy formula
Payment = Loan × r ÷ (1 − (1 + r)^−n)
Balance after T months = Loan × (1 + r)^T − Payment × ((1 + r)^T − 1) ÷ r
Net cost of buying = down + Payment × T + Balance − resale value
Net cost of leasing = due at signing + lease payment × T + disposition fee
- r — monthly interest rate (APR ÷ 12); n — loan term; T — comparison period (the lease term)
- Balance — what you still owe the lender at month T; it comes out of the sale proceeds
Worked example: $35,000 car, 36 months
- Loan: 35,000 × 1.06 + 500 − 3,000 = $34,600.
- Payment at 6% for 60 months: $668.91.
- Balance after 36 payments: $15,093.
- Net buying cost: 3,000 + 24,081 + 15,093 − 21,000 = $21,174.
- Net leasing cost: 2,500 + 36 × 450 + 395 = $19,095.
- Leasing is cheaper by $2,079, or about $58 a month.
How resale value changes the winner
The table varies only the car's value at month 36 in the example above; every figure is calculated with the formulas shown.
| Value after 36 months | Share of price | Net cost of buying | Net cost of leasing | Cheaper option |
|---|---|---|---|---|
| $17,500 | 50% | $24,674 | $19,095 | Leasing by $5,579 |
| $19,000 | 54% | $23,174 | $19,095 | Leasing by $4,079 |
| $21,000 | 60% | $21,174 | $19,095 | Leasing by $2,079 |
| $22,500 | 64% | $19,674 | $19,095 | Leasing by $579 |
| $24,000 | 69% | $18,174 | $19,095 | Buying by $921 |
What the numbers do not show
This is a cash comparison over the lease term, and the answer hinges on one number you cannot know today: what the car will sell for. Strong resale value, as with cars that hold their value well, tilts the result toward buying; a car that depreciates quickly favours leasing. Check depreciation expectations with the car depreciation calculator before deciding.
Some costs differ in practice. A lease usually limits the miles you may drive and charges for excess wear; buying has no such limits. Leased cars are generally under warranty for the whole term, which can mean lower repair costs, while an owned car's repair bills grow as it ages. Insurance is often required at higher coverage levels on a lease. And a lease that is returned leaves you with nothing, while a bought car can be driven for years after the loan ends — the long-run cost per year of owning is usually lower, which is explored in the car ownership cost calculator.
Finally, the calculator treats a dollar paid now and a dollar paid later as the same. If your down payment or due-at-signing could earn interest elsewhere, the option with the larger upfront cash looks slightly worse than the figures here suggest.
Sources
The loan payment and balance use the standard amortization formulas found in any finance textbook; the 6% loan check (a $10,000 loan over 60 months repays $11,599.68) matches published amortization tables. Lease terms follow the structure explained by the US Federal Reserve Board's consumer guide “Keys to Vehicle Leasing”. The example inputs are illustrative, not quotes.
Frequently asked questions
How does this calculator compare leasing and buying?
Over the lease term, buying costs your down payment plus the loan payments plus the loan balance you still owe, minus what the car can be sold for. Leasing costs the amount due at signing, the monthly payments and the turn-in fee. The smaller net figure is the cheaper option.
Why does the resale value matter so much?
It is the biggest unknown. Every $1,000 more the car is worth at the end makes buying $1,000 cheaper, while a lease payment already assumes a residual value set in advance.
What is left out of the comparison?
Insurance, maintenance, registration, mileage penalties on a lease, wear-and-tear charges, and the interest you could have earned on the cash. Add them yourself if they differ between the two options.
What if I keep the car after the loan is paid off?
Then buying usually wins in the long run, because you stop paying while still owning an asset. This calculator compares equal periods; use the car ownership cost calculator to see the longer picture.
Is the sales tax financed?
Yes. The calculator adds sales tax and fees to the loan, then subtracts the down payment. If you pay tax in cash, raise the down payment accordingly.