How does the calculator compare buying with leasing?
For buying, it finds the monthly loan payment on the price minus your down payment at your loan rate and term. Over the comparison period it adds the down payment and every loan payment made. If the loan is not finished, it adds the remaining balance, since you would have to pay that off to sell. It then subtracts the car's resale value at the end.
For leasing, it adds the drive-off amount to the monthly lease payment times the months in the period. It assumes you return the car with nothing owed.
The difference, buy minus lease, shows which option costs less in plain dollars. A positive figure means leasing is cheaper; a negative one means buying is. The comparison ignores investment returns on cash, sales tax differences, insurance and maintenance.
Net cost to buy = Down + (M × k) + Balance after k months − Resale value Net cost to lease = Drive-off + Lease payment × k Difference = Net cost to buy − Net cost to lease
- M
- monthly loan payment on the price minus the down payment
- k
- months in the comparison period
- Resale value
- price × resale %
Example: buying vs leasing a $36,000 car for three years
Scenario: A driver compares buying a $36,000 car with $4,000 down at 6.4% for 60 months against leasing it for $449 a month with $2,800 due at signing, over three years, assuming the car is worth 56% of its price at the end.
- Loan payment$32,000 at 6.4% for 60 months = $624.62
- Payments in 3 years$624.62 × 36 = $22,486.32
- Balance still owedAfter 36 payments: $14,036.00
- Resale value$36,000 × 56% = $20,160.00
- Net cost to buy$4,000 + $22,486.32 + $14,036.00 − $20,160.00 = $20,362.32
- Net cost to lease$2,800 + $449 × 36 = $18,964.00
- Difference$20,362.32 − $18,964.00 = $1,398.32
With a 56% resale value, leasing costs $1,398.32 less than buying over these three years.
Buying would come out ahead only if the car resold for more than about 59.9% of its price, so the resale estimate carries most of the weight.
When should you compare leasing with buying?
When a lease and a loan are both on the table
Enter the actual lease quote and loan terms for the same car. The calculator puts them on equal footing over the lease length.
When you expect to change cars every few years
If you know you will replace the car in three years either way, this comparison matches your real decision closely.
When you are unsure about resale value
Run a low, middle and high resale estimate. If the winner stays the same across all three, the decision is less sensitive than it looks.
When a large down payment is involved
Try different down payments on the buy side and drive-off amounts on the lease side to see how cash upfront shifts the result.
What skews a lease-versus-buy comparison?
Comparing monthly payments only
A lease payment is usually lower than a loan payment for the same car, but the buyer builds equity. Net cost over the same period is the fair comparison.
Leaving out mileage charges
If you drive more than the lease allows, per-mile charges at turn-in can be large. Add your expected overage cost to the lease side.
Using an optimistic resale value
A high resale guess makes buying look better. Use a conservative figure, or test several, because condition and mileage at sale matter.
Forgetting the lease's drive-off cash
Cap cost reduction, acquisition fee and upfront taxes are real costs. Include everything due at signing except the first payment.
Ignoring how long you will really keep the car
If you would drive a purchased car for eight years, a three-year comparison misses the payment-free years that make buying cheaper.
How much does resale value change the lease-or-buy answer?
Resale value is the one input you cannot know in advance, and it moves the buying side dollar for dollar. The table keeps everything else from the example fixed and changes only the resale percentage after three years.
With these terms, buying and leasing break even at a resale value of about 59.9% of the price, or $21,558.32. Above that, buying wins; below it, leasing does. Mileage, condition and demand for the model all affect where the actual value lands.
| Resale value | Net cost to buy | Net cost to lease | Buy − Lease | Lower cost |
|---|---|---|---|---|
| 44% ($15,840) | $24,682.32 | $18,964.00 | $5,718.32 | Lease |
| 50% ($18,000) | $22,522.32 | $18,964.00 | $3,558.32 | Lease |
| 53% ($19,080) | $21,442.32 | $18,964.00 | $2,478.32 | Lease |
| 56% ($20,160) | $20,362.32 | $18,964.00 | $1,398.32 | Lease |
| 62% ($22,320) | $18,202.32 | $18,964.00 | -$761.68 | Buy |
Terms used on this page
- Residual Value
- Residual value is the estimated worth of a leased vehicle at the end of the lease, set by the leasing company when you sign. It is usually stated as a percentage of the sticker price. A higher residual means less depreciation to pay for during the lease, which lowers the monthly payment, and it is also your buyout price.
- Money Factor
- The money factor is the finance charge rate on a car lease, written as a small decimal such as 0.00250. Multiply it by 2,400 to get an approximate equivalent APR, so 0.00250 is roughly 6.00%. Along with the capitalized cost and residual value, it determines the rent charge portion of your monthly lease payment.
- Negative Equity
- Negative equity means you owe more on a loan than the asset securing it is worth. It is common with car loans because vehicles lose value quickly while long loan terms pay principal down slowly. If you sell or trade in with negative equity, you have to cover the gap, often by rolling it into a new loan.
- Loan Term
- The loan term is the length of time you have to repay a loan, usually stated in months for consumer loans. A longer term lowers the monthly payment but increases the total interest you pay, because the balance stays outstanding longer. A shorter term costs more each month and less overall.
Lease vs. Buy Car Calculator: common questions
When does leasing a car make more sense than buying?
Leasing tends to cost less when you replace cars every few years, drive within the mileage allowance and the car loses value quickly. It also suits people who want a predictable payment and warranty coverage throughout. If you keep cars for many years or drive a lot, buying usually comes out ahead.
Should I lease or buy if I drive a lot of miles?
High-mileage drivers usually do better buying, because leases charge for each mile over the allowance at turn-in. You can buy a higher allowance upfront, but that raises the payment. When buying, extra miles lower resale value instead, which you can reflect with a lower resale percentage here. Run the lease vs buy calculator with your expected overage charges added to the lease drive-off to see which option holds up at your mileage.
Why does the buy side include the remaining loan balance?
Because the comparison assumes you sell the car at the end of the period, and the loan must be paid off from the sale. Adding the balance and subtracting the resale value gives your net position. If the balance exceeds the resale value, the loan is underwater and buying looks more expensive.
Does this comparison include the cost of the money I put down?
No. It compares plain dollars paid out and recovered, without crediting any investment return you could earn on cash. If you want to factor in what your cash could earn, the lease vs pay cash calculator compares the options on a future-value basis. The opportunity cost matters most when the down payment or drive-off is large and the expected return is high.
How do I estimate a car's resale value in three years?
Look at what similar models that are three years old with comparable mileage sell for today, and treat that as a rough guide. Lease residual values for the same model can also hint at what the lessor expects. Test a range in the calculator rather than relying on one number.
Is buying always cheaper in the long run?
Usually, if you keep the car well past the loan term, because years without a payment offset the early depreciation. It is not guaranteed: repair costs on an older car can be high, and a lease with strong manufacturer support can be inexpensive. Compare over the period you actually expect to keep the car.
Can I buy my car at the end of the lease instead?
Most leases include a purchase option at a price set in the contract, usually the residual value. Buying out can make sense if the car is worth more than the buyout or you have exceeded the mileage allowance. You would then finance or pay the buyout amount like any used-car purchase.
Do I pay sales tax differently when leasing versus buying?
Often yes. When buying, tax is usually charged on the price, typically less any trade-in, and paid upfront or financed. Many states tax a lease on each monthly payment instead, so you pay tax only on the part of the car you use. Include tax in both sides for a closer comparison.
Sources
- Auto loans — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Consumer Credit – G.19 statistical release — Federal Reserve Board. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations, last checked October 17, 2026. See our methodology.