Lease vs Buy Calculator
Leasing pays for depreciation, buying builds equity. Enter both deals to compare total out-of-pocket cost and where you stand when the lease term ends.
Last updated: October 2026
Lease and buy details
Lease terms
Buy terms
How leasing works: you pay for depreciation
When you lease, you are not buying the car. You are paying for the depreciation during your lease term plus a financing charge called the rent charge. At the end you return the car (or buy it at the pre-set residual value) and walk away with no equity. The monthly payment has two parts: the depreciation fee, which is (capitalized cost minus residual) divided by months, and the rent charge, which is (capitalized cost plus residual) times the money factor.
The money factor is just the lease world's way of quoting an interest rate. Multiply it by 2400 to get the equivalent APR: a money factor of 0.00250 equals 6% APR. Dealers sometimes present the money factor hoping you will not convert it, so always do the math and compare it against loan APRs you could get.
How buying works: you build equity
When you buy with a loan, every payment has two parts: interest and principal. The principal part builds equity, your ownership stake in the car. Early in the loan, most of each payment is interest, so equity builds slowly at first and faster later. After the loan is paid off, the car is yours: no more payments, and whatever it is worth is your asset.
What this calculator compares
The fair comparison is over the same time window: the lease term. For the lease, total out-of-pocket is the down payment plus all monthly payments, and you end with zero equity. For the buy, total out-of-pocket is the down payment plus the loan payments made during those same months, but you also own equity: the car's value (estimated from the residual percentage) minus the remaining loan balance. The net cost of buying is out-of-pocket minus equity, which is the apples-to-apples number against the lease total.
Worked example
A $35,000 car. Lease: 36 months, $3,000 down, $420 a month, 58% residual, 0.00250 money factor (6% APR equivalent). Lease outlay = $3,000 + 36 x $420 = $18,120, ending with no car. Buy: $5,000 down, 6% APR, 60 months on the remaining $30,000. The monthly payment is $579.98. After 36 payments the remaining balance is about $13,086, while the car is worth roughly 58% of $35,000 = $20,300, leaving $7,214 in equity. Buy out-of-pocket over 36 months = $5,000 + 36 x $579.98 = $25,879; net cost = $25,879 - $7,214 = $18,666. The lease is cheaper over three years by about $546, but the buyer holds $7,214 in equity and is 60% of the way to owning the car free and clear.
When leasing wins
Leasing tends to win if you want a new car every 2 to 3 years, drive predictable low miles, value warranty coverage and low maintenance, or can write the lease off as a business expense. The monthly payment is usually lower than buying the same car, which is the main attraction.
When buying wins
Buying tends to win if you keep cars a long time, drive a lot of miles, want to modify the car, or hate the idea of perpetual payments. The breakeven point is usually around year 4 to 6: after that, the buyer's payments stop while the lessee starts another lease. Over a decade of driving, buying one car and keeping it typically costs far less than three back-to-back leases.
Mileage limits and end-of-lease costs
The lease math above assumes you stay within the mileage allowance, usually 10,000 to 12,000 miles a year. Excess miles typically cost $0.15 to $0.30 each, and wear-and-tear charges can add hundreds at turn-in. If you drive 15,000+ miles a year or your life is unpredictable, factor those penalties in before choosing the lease.
Lease vs Buy FAQs
What is a money factor on a car lease?
The money factor is how leases quote the financing charge, instead of an APR. Multiply it by 2400 to get the equivalent APR: 0.00250 equals 6%. Always convert it so you can compare the lease against loan rates.
What is residual value?
The residual value is the leasing company's estimate of what the car will be worth when the lease ends, stated as a percentage of MSRP. A higher residual means less depreciation during the lease, which means a lower monthly payment.
Is it better to lease or buy a car?
It depends on how long you keep cars. Leasing is usually cheaper per month and suits drivers who want a new car every few years. Buying is usually cheaper over the long run because payments eventually stop and you build equity.
What happens at the end of a car lease?
You return the car, pay any disposition fee plus excess mileage or wear charges, and walk away. Alternatively, you can buy the car at the pre-set residual value, or sometimes extend the lease. You build no equity unless you buy it.
Can I negotiate a car lease?
Yes. The capitalized cost (the car's price in the lease) is negotiable just like a purchase price, and the money factor sometimes has markup you can push down. The residual value is set by the leasing company and is generally not negotiable.
Does leasing build equity?
No. Lease payments cover depreciation and the rent charge, and the car belongs to the leasing company. When the lease ends you have nothing to show for the payments unless you buy the car at its residual value.
What credit score do I need to lease a car?
The best lease deals, with the lowest money factors, typically require a score of 720 or higher. You can lease with lower scores, but the money factor rises, which erases much of the lease's payment advantage.