Compare the total cost of leasing vs buying to see which option saves you more money over the same period.
Leasing usually has a lower monthly payment and lower upfront cost, but you don't own anything at the end. Buying costs more month-to-month, but you build equity and eventually become payment-free.
If you drive more than 12,000–15,000 miles per year, leasing gets expensive fast due to mileage overage fees. If you like driving a new car every 2–3 years and stay within mileage limits, leasing can be a reasonable choice.
The calculator compares total out-of-pocket cost over the same time period, factoring in car value at the end. For a true apples-to-apples comparison, enter the same number of years for both options.
The lease vs buy decision comes down to three things: how long you plan to keep the vehicle, how many miles you drive annually, and whether building equity matters to you. Neither option is universally better — the right answer depends on your specific situation and priorities.
Leasing is essentially financing the depreciation of a vehicle rather than its full value. You pay for the portion of the car's value you use during the lease term. Buying finances the entire vehicle — you own an asset at the end, but you absorb more of the car's depreciation in your payments along the way.
Leasing is typically advantageous when you drive fewer than 12,000–15,000 miles per year (most leases set the mileage cap here), prefer a new vehicle every 2–3 years, want lower monthly payments on a given vehicle, or use the car for business and can deduct lease payments as an expense. The lower monthly payment is the most visible advantage — lease payments are typically 20–35% lower than loan payments on the same vehicle because you're only financing the depreciation, not the full price.
Vehicles with high residual values (strong resale retention — typically Toyota, Honda, Subaru, and certain luxury brands) offer the best lease deals. A high residual means the leasing company predicts more value remaining at lease end, so you pay less depreciation per month. Check residual percentages before choosing a lease — they vary significantly by model and can be the difference between a good and poor deal.
Buying is better when you drive high annual mileage (excess mileage fees on leases — typically $0.15–$0.25/mile — add up quickly above the cap), plan to keep the vehicle 5+ years, want to modify or customize the car, or want to build equity toward your next vehicle purchase. Once a purchased car is paid off, you have zero monthly payment while continuing to use the asset — a phase of ownership that doesn't exist with leasing.
Over a 10-year horizon, owning almost always comes out ahead of perpetual leasing. The crossover point — when buying's accumulated equity advantage overcomes leasing's monthly payment advantage — typically occurs somewhere between years 4 and 6 depending on vehicle depreciation rate and financing terms.
The money factor is the lease equivalent of an interest rate. To convert to APR, multiply the money factor by 2,400. A money factor of 0.0025 equals 6.0% APR. Dealers sometimes present money factors without converting them, which can obscure whether you're getting a competitive rate. Always convert and compare to current auto loan rates.
The residual value is what the manufacturer predicts the car will be worth at lease end, expressed as a percentage of MSRP. A 55% residual on a $40,000 vehicle means the car is expected to be worth $22,000 after 36 months — and you're only financing the $18,000 difference (plus the finance charge). Higher residuals produce lower monthly payments. This is published by manufacturers monthly and varies by model, term, and mileage allowance.
At the end of a lease, you have three choices: return the vehicle and walk away, purchase the vehicle at the predetermined residual price, or trade into a new lease. Returning is the default — you hand over the keys, pay any excess mileage or wear-and-tear charges, and pay the disposition fee (typically $300–$500).
Buying at lease end makes sense when the residual price is at or below current market value — which sometimes happens when market values have risen above the manufacturer's prediction. Check the car's market value against the residual before your lease ends. If the market value exceeds the residual, you're buying at below-market — you could even purchase and immediately resell for a gain.
This calculator compares net costs over a set time period but doesn't factor in insurance differences (leases typically require lower deductibles and higher liability coverage, which can add $10–$30/month), the opportunity cost of the down payment, tax treatment of lease payments for business use, or regional sales tax variations (some states tax the full vehicle value even on leases). For a complete comparison, these factors should be added to your own analysis alongside the calculator's core result.