Leasing and buying are easy to compare badly. A lease payment is usually lower than a loan payment, but at the end of a lease you own nothing, while at the end of the same period a buyer owns a car with real resale value. This calculator lines both choices up over the same window — the lease term — and subtracts the equity a buyer keeps, so you compare net cost rather than monthly payments.
How to use the lease vs. buy calculator
- Enter the vehicle price you negotiated and choose the period to compare over, normally the lease term on offer.
- Under Buying, enter your down payment, the sales tax rate, the loan APR and loan term, and the car’s value at the end as a percentage of the price.
- Under Leasing, enter the monthly payment (including tax), the cash due at signing (including the first payment) and any end-of-lease costs.
- Optionally set a return on cash you keep to count opportunity cost. Leave it at 0 for a plain cash comparison.
How the comparison works
The term in parentheses is your equity: what you could sell the car for minus what you still owe. If you sell or trade the car at the end of the period, that is money back in your pocket, so it reduces the cost of buying. Sales tax is financed with the loan here, which is common; most states tax only the lease payments when you lease.
When you enter an investment return, each payment is grown to the end of the period at that rate. A dollar paid at signing has 36 months to grow; a dollar paid in the final month has almost none. That penalizes large up-front payments on either side.
Worked example
A $38,000 car, compared over 36 months. Buying: $4,000 down, 7% sales tax financed, 6.5% APR for 60 months, and the car is worth 55% of its price after three years. Leasing: $520 a month, $3,000 due at signing and a $395 disposition fee.
Financed = 38,000 + 2,660 tax − 4,000 = $36,660 → payment $717.29
Buy: 4,000 + 36 × 717.29 = $29,822.62 paid; car worth $20,900, loan balance $16,102.25 → equity $4,797.75
Net cost of buying = $25,024.87
Lease: 3,000 + 35 × 520 + 395 = $21,595.00
Leasing costs about $3,430 less over three years. Adding a 4% return on cash widens the gap to about $3,988, because the buyer’s larger payments could have been earning interest.
When buying comes out ahead
- You keep the car a long time. Once the loan is paid off you drive for only maintenance and insurance, and the cost per year keeps falling. A lease never reaches that stage.
- You drive a lot. Lease contracts charge for every mile over the allowance; owners just accept a lower resale value.
- The car holds its value well. A higher resale percentage directly reduces the net cost of buying.
- You can get a low loan rate. Promotional financing narrows or erases the lease advantage.
When leasing comes out ahead
- You replace cars every two or three years anyway. You avoid the steepest part of the depreciation curve as a buyer.
- The lease is subsidized. Manufacturers sometimes support leases with inflated residuals or low money factors.
- Sales tax is high. In most states lessees pay tax only on the payments, not on the full price.
Use the car lease calculator to rebuild a lease quote from its parts, the car loan calculator to price the financing, and the car depreciation calculator to estimate the resale value.
This comparison is an estimate for planning, not financial advice. Insurance, maintenance, registration and repairs are excluded; they can differ between a new leased car and an older owned one.
Frequently asked questions
Is it cheaper to lease or buy a car?
Over a typical three-year window, leasing often has the lower net cost because the steepest depreciation happens early and the lessee does not pay sales tax on the full price. Buying usually wins when you keep the car well beyond the loan term, because the payments stop while the car keeps working.
How does this calculator compare the two fairly?
It looks at the same period for both — the lease term. For buying it counts the down payment and loan payments, then subtracts the equity you would have at the end (the car's value minus what you still owe). For leasing it counts everything you pay, including end-of-lease fees.
What is opportunity cost in a lease vs. buy comparison?
Cash spent on a car cannot earn interest elsewhere. The calculator grows every payment at the rate you choose, so a larger down payment carries a cost even if it lowers the monthly bill. Set the rate to 0 to compare plain cash totals.
What resale value should I enter?
Use the percentage of the price you expect the car to be worth when the lease would end. Many mainstream cars keep somewhere around half to two-thirds of their value after three years, but it varies widely by model and mileage; the car depreciation calculator can help you estimate it.