Car Lease vs Buy Calculator
Compare the true out-of-pocket cost of leasing versus buying a car over the same time period. Use this before signing any deal to see which option leaves more money in your pocket.
About this calculator
Leasing and buying have very different cash-flow structures that are hard to compare without a common framework. The total lease cost over the term is straightforward: Lease Total = (Monthly Payment × Lease Term) + Down Payment. The buy side is more complex because you are making loan payments but also building equity. The monthly loan payment is calculated using the standard amortization formula: M = (P − D) × [r(1+r)^n] / [(1+r)^n − 1], where P is the car price, D is the down payment, r is the monthly interest rate, and n is the number of months. After the lease term ends, the purchased car retains residual value (estimated at roughly 60% of MSRP after a typical 36-month term). The calculator subtracts that equity from the buyer's total outlay to produce a comparable net cost. A positive result means leasing cost more; a negative result means buying cost more.
How to use
Car MSRP: $35,000. Lease: $350/month × 36 months + $2,000 down = $14,600 total. Buy: $5,000 down, 5% APR loan. Monthly rate r = 0.05/12 = 0.004167. Loan amount = $30,000. Monthly payment = 30,000 × [0.004167 × (1.004167)^36] / [(1.004167)^36 − 1] = $898.83. Total paid = $898.83 × 36 + $5,000 = $37,358. Residual value at 36 months ≈ $35,000 × 0.60 = $21,000. Net buy cost = $37,358 − $21,000 = $16,358. Leasing saves approximately $1,758 in this example over 36 months.
Frequently asked questions
Is it cheaper to lease or buy a car over the long term?
Buying is almost always cheaper over the long term because once the loan is paid off, you own an asset with residual value and stop making payments. Leasing means you are perpetually making payments with nothing to show at the end of each term. However, over a short window of two to three years, leasing can appear cheaper because you avoid absorbing the steepest depreciation years and typically make lower monthly payments.
What hidden costs should I include when comparing a car lease versus a purchase?
Leases often include mileage overage fees (commonly $0.15–$0.25 per mile over the limit), disposition fees at lease end, and gap insurance requirements. On the purchase side, you should factor in higher insurance premiums during the loan period, maintenance costs that grow as the car ages, and the opportunity cost of the larger down payment. A fair comparison must include all of these line items, not just the monthly payments.
How does the loan interest rate affect whether buying or leasing a car is better?
A higher loan interest rate inflates your monthly purchase payment and the total interest paid over the term, narrowing the financial gap between buying and leasing. At very high rates — above 7–8% APR — leasing can look competitive even over longer periods. Conversely, when you can secure a low-rate or 0% promotional loan, buying wins decisively because you build equity with minimal interest cost.