Lease vs Buy Calculator

Lease vs Buy: Quick Comparison Table

When Leasing Makes Sense

• You drive under 12,000 miles a year — Mileage caps and overage charges are the #1 lease killer. Under 12k/yr, you'll stay well within the allowance.
• You want a new car every 2–3 years — If you cycle vehicles often anyway, leasing avoids depreciation hits and resale hassle.
• You can write off the lease as a business expense — Self-employed drivers and businesses can often deduct the entire lease payment on their taxes — substantially shifting the math vs buying.
• You're targeting a luxury car for less per month — Luxury brands have strong residuals (often 60%+), making lease payments dramatically lower than financing the same vehicle.
• You don't customize or modify cars — If a stock vehicle is fine, you forgo the main benefit of ownership and simply pay less per month.

When Buying Makes Sense

• You drive more than 15,000 miles a year — Mileage overages on a lease can easily exceed $4,000 over 3 years. Owning eliminates this entirely.
• You keep cars 5+ years — Once the loan is paid off, your only costs are insurance, fuel, and maintenance. Years 5–10 are when buying massively pulls ahead financially.
• You want freedom to modify or upgrade — Lifted trucks, performance mods, custom wraps, towing setups — all off-limits on a lease.
• You build equity you can use later — A paid-off car is a $15–25k asset. You can sell it, trade it, or pass it down — none of that exists with a lease.
• You drive in harsh conditions — Wear-and-tear chargebacks (curb rash, interior damage, dings) hit lease returns hard. Owning sidesteps this.
• You want predictable long-term cost — After payoff, your monthly cost drops to $200–$400 of insurance and fuel. A perpetual leaser pays $400+ forever.

Hidden Costs of Leasing

Hidden Benefits of Buying

How Money Factor Works

Money factor is the lease equivalent of APR — a tiny decimal representing the interest portion of your lease. To convert it, multiply by 2400:

The finance charge in a lease formula is calculated as:

Note: dealers can mark up the money factor — always check the advertised "buy rate" or compare to your bank's auto APR (divided by 24) to spot inflated finance charges.

Frequently Asked Questions

Is leasing or buying a car cheaper?

Over a single 3-year window, leasing usually has lower out-of-pocket cost. Over 6+ years (i.e. continuing to drive a paid-off car vs. starting a second lease), buying nearly always wins because you stop making payments while the leaser keeps cycling.

How is a lease payment calculated?

Lease monthly = depreciation fee + finance charge, then taxed. Depreciation = (cap cost − residual) ÷ term. Finance = (cap cost + residual) × money factor. Multiply the sum by (1 + tax rate) for your taxed monthly. Our calculator handles all this.

What is a money factor and how do I convert it to APR?

Money factor is the lease equivalent of APR. Multiply by 2400 to convert. So 0.00125 = 3.0% APR. Dealers sometimes inflate the money factor for profit; always compare to your bank's auto loan rate.

Should I put money down on a lease?

Generally no. A 'cap cost reduction' lowers your monthly payment but you lose it entirely if the car is totaled — gap insurance only covers the lease balance. Most experts recommend zero down beyond the first month and acquisition fee.

What's a typical residual value for 36 months?

55% of MSRP is common. Some makes (Toyota, Honda, Subaru) post 60%+. Luxury and rapidly-depreciating models sometimes residual under 50%. Higher residual = lower payment.

Can I negotiate the residual or money factor?

Residual is set by the bank and not negotiable. Money factor can sometimes be lowered (toward the manufacturer's 'buy rate') if the dealer marked it up. Always ask 'what's the buy rate?' before signing.

What if I drive more miles than my lease allows?

Standard overage is $0.25/mile. Going 6,000 miles over a 3-year lease costs $1,500. If you regularly exceed 15k/yr, buying is almost always cheaper than paying overages or pre-buying high-mile leases.

Can I buy my leased car at the end?

Yes — every lease includes a buyout option at the residual price. If the market value exceeds the residual, this can be very profitable. If it's below, return the car.

Does this calculator account for opportunity cost on the down payment?

The advanced section includes an investment-return rate field for opportunity cost analysis. The headline net advantage focuses on direct out-of-pocket cost minus end-of-term equity — the most concrete comparison.

Is leasing a good idea for a business?

Often yes — businesses can deduct lease payments as an operating expense, which can shift the after-tax math significantly. Talk to your accountant about Section 179 vs. lease deduction trade-offs.