How Car Lease vs. Buy Calculator Works

The calculator runs two parallel scenarios over the same comparison horizon (for example, 36, 48, or 60 months). In the buying scenario, it models a standard auto loan: it estimates the amount financed after down payment and trade-in, calculates an amortized payment from APR and term, totals the payments you would make during the horizon, and then subtracts your estimated end-of-horizon equity (resale value minus any remaining loan balance). In the leasing scenario, it estimates the lease payment using common lease math—depreciation plus rent charge—then totals your due-at-signing costs and monthly payments across the horizon, optionally adding a disposition fee at the end of each full lease cycle.

Because most people do not keep a car for exactly the loan term or exactly the lease term, the horizon-based approach is the most practical way to compare. If your horizon is shorter than the loan term, the tool estimates the remaining balance. If your horizon is longer than the lease term, it repeats the same lease terms to approximate a second (or third) lease cycle, which is a helpful baseline when you tend to stay in continuous leases.

Step-by-step calculation flow

• 1) Pick a realistic horizon: Enter the number of months you expect to keep the vehicle. This is the anchor for the entire comparison.
• 2) Decide how to treat sales tax: You can include or exclude tax. For buying, you can also model tax as financed or paid upfront, depending on how you prefer to structure the deal.
• 3) Buying setup: Enter purchase price, fees, down payment, trade-in, loan APR, and loan term. The tool computes an amount financed and a monthly payment.
• 4) Buying net cost: The tool totals upfront outlay, payments made during the horizon, and running costs (maintenance and insurance). It then subtracts equity from your resale estimate minus remaining loan balance.
• 5) Leasing setup: Enter MSRP, cap cost, lease term, residual percentage, and a money factor (or an APR that the tool converts to a money factor approximation). Add lease fees and any cap reduction.
• 6) Lease total cost: The tool estimates the lease payment, optionally adds tax, totals due-at-signing costs and payments across the horizon, and adds disposition fees for any full cycles that end within the horizon.
• 7) Compare outcomes: You get total cost, effective monthly cost, and a clear breakdown so you can see which assumptions are driving the result.

Key Features

Horizon-based comparison that matches real behavior

Many online comparisons assume you keep a purchased car for the full loan term while comparing it to a shorter lease. This tool aligns both options to the same time horizon, so you are comparing what you will spend over the period you actually plan to keep the car.

Buying math that includes remaining balance and equity

If you sell before the loan ends, your remaining balance matters. The calculator estimates the remaining principal after the number of payments you make during the horizon and then computes your equity as resale value minus that balance. This is crucial for short ownership cycles where you may still owe a meaningful amount.

Lease payment model using money factor or APR input

Lease offers may present a money factor rather than a familiar APR. The calculator supports both. If you enter APR, it uses the common approximation money factor ≈ APR / 2400. While simplified, this is useful for consistent comparison when a money factor is not provided.

Separate fields for fees and taxes

Fees can be the silent deal-breaker. Buying fees (doc, registration, dealer add-ons) are separated from leasing fees (acquisition, doc/other, disposition). You can model “due at signing” clearly and understand how much of your cost is actual vehicle depreciation versus administrative cost.

Readable breakdown you can copy, save, and share

The results panel provides a summary and a breakdown table of major components. Copy the output for negotiation notes, budget planning, or sharing with a partner. Download a text file to keep an audit trail of the assumptions you used.

Use Cases

• Comparing a dealer lease offer to a bank loan quote: Enter the cap cost, residual, and money factor from the lease worksheet and compare to your pre-approved loan terms.
• Testing “low payment” lease specials: Many specials rely on a large cap reduction or high fees. Model the due-at-signing amount to see the real effective monthly cost.
• Short ownership planning: If you typically change cars every 36–48 months, compare leasing to buying-and-selling early, including remaining balance.
• High depreciation vs. strong resale vehicles: Adjust the resale estimate to see whether ownership benefits from equity or whether leasing better contains depreciation risk.
• Tax scenario exploration: In some places, leases are taxed monthly while purchases are taxed upfront. Toggle tax and test both buy tax modes to see the sensitivity.
• Budgeting for total transportation cost: Add realistic annual maintenance and insurance costs to understand how the vehicle fits your monthly budget beyond the payment.
• Negotiation prioritization: When the result is close, the breakdown shows whether price/cap cost, money factor/APR, fees, or resale value is the lever to focus on.

Use cases become especially powerful when you treat this calculator as a decision model rather than a single-answer oracle. If you run three scenarios—conservative, expected, and optimistic—you can see whether one option consistently wins or whether the choice depends on uncertain variables like resale value or interest rates.

Optimization Tips

Validate the three lease pillars: cap cost, residual, and money factor

Leases are driven by (1) cap cost, (2) residual value, and (3) money factor. Cap cost is negotiable like a purchase price. Residual is usually set by the lender and changes with mileage allowances and trim. Money factor can vary and may include markup. If you confirm these three items, your lease estimate becomes far more reliable.

Use a conservative resale estimate when buying

Resale value is one of the largest drivers for ownership. Overestimating resale makes buying look better than it may be. Start with a conservative resale number and then test a higher best-case value. If buying still wins under conservative resale, you can feel more confident about the result.

Match the horizon to your habits and avoid comparing mismatched terms

If you tend to keep cars for five years, compare both options over 60 months. If you are a three-year driver, model 36 months. A lease may look attractive in month-to-month cost, but repeating lease cycles across longer horizons can shift the total. Likewise, buying can look expensive in the first years but improve as equity builds.

FAQ