How to use the lease vs buy car calculator
- Enter the Car price ($). If you want sales tax included, add your Sales tax rate (%).
- Under Lease, enter the Monthly lease payment ($), the cash Due at signing, excluding the first payment ($) (subtract the first payment from an advertised “due at signing” figure), and the Lease term (months). Put acquisition and disposition fees, plus any expected mileage or wear charges, in Lease fees and charges ($).
- Under Buy with a loan, enter your Down payment ($), Loan APR (%) and Loan term (months), then the Resale value when the lease would end ($).
- Read the headline for which option costs less over the lease term, and the table for net cost and cost per month.
How the comparison works
A fair comparison uses one time period, so the calculator uses your lease term. Leasing costs the cash due at signing (without the first payment), plus every monthly payment, plus fees. Buying costs the down payment and sales tax, plus the loan payments made in that period, plus any loan balance still owed, minus what you sell the car for.
Payment = Loan x r / (1 - (1 + r)^-n), where r = APR / 12
Balance after k payments = Loan x (1 + r)^k - Payment x ((1 + r)^k - 1) / r
Each payment is rounded to the cent
Sales tax is applied to the purchase price and to each lease payment, which approximates most states. The CFPB and the FTC explain the main trade-offs.
Worked example with the default numbers
A $35,000 car bought with $5,000 down borrows $30,000 at 6.5% for 60 months, a payment of $586.98. After 36 payments (36 x $586.98 = $21,131.28) you still owe $13,177.12. Buying costs $5,000.00 + $21,131.28 of payments + $13,177.12 payoff - $20,000.00 resale = $19,308.40. The lease costs $2,000.00 + 36 x $450.00 = $18,200.00. Leasing costs $1,108.40 less over 36 months. Raise the resale value to $21,500 and buying wins by $391.60.
Limits and edge cases
- The comparison stops at the end of the lease. Buying usually looks better the longer you keep the car after the loan is paid off, because you stop making payments while a lessee starts a new lease.
- Insurance, maintenance, registration and interest you could earn on your down payment are not included. Leases often require higher insurance coverage, so compare quotes.
- Leases limit mileage and charge for excess wear and early termination. Estimate those and enter them in Lease fees and charges.
- To test loan terms on their own, use the auto loan calculator, estimate tax with the sales tax calculator, or see the effect of extra payments with the loan payoff calculator.
Lease vs buy questions people ask
Is it cheaper to lease or buy a car?
It depends on how long you keep the car. Compare both over the same period: lease payments and fees versus loan payments, interest and the loan payoff, minus what the car is worth at the end. Buying usually wins the longer you keep the car after the loan is paid off.
How can I compare a 36-month lease with a 60-month loan?
Judge both at month 36. The buyer has made 36 payments, still owes the remaining loan balance, and can sell the car for its resale value. Counting all 60 loan payments against 36 lease payments overstates the cost of buying.
What is a money factor?
The lease version of an interest rate. Multiply it by 2,400 for an approximate APR, so 0.0025 is about 6%.
Can I buy my leased car?
Often, if your lease includes a purchase option. The buyout price is set in your contract, so compare it with the car's current market value before you decide.
What happens if I go over the mileage limit on a lease?
You pay a fee for each extra mile when you return the car. Most leases allow 10,000 to 15,000 miles a year, so add your expected overage charge to Lease fees and charges.
Sources: Federal Trade Commission, Financing or Leasing a Car. Consumer Financial Protection Bureau, What should I know about leasing versus buying a car?