Car Lease vs Buy Calculator

A lease payment covers two things: the value the car loses while you drive it, and a rent charge for the lessor's money. The residual is what the lessor expects the car to be worth at the end.

• The cap cost is the price you negotiated, plus any acquisition fee, minus what you pay at signing.
• The money factor is the lease's interest rate in another form. Times 2,400 it is roughly an APR, so 0.0021 is about 5.04%.
• Sales tax, when you add it, is charged on each payment.

Buying is a normal car loan. Over the same months you pay the down payment and the loan payments. At the end you own a car you could sell, but you may still owe part of the loan.

The tool compares the lease total with that net figure over the lease term. It also finds the break-even resale value: the car's worth at the end at which both cost exactly the same.

Sam's compact SUV

Sam negotiated $34,500 on a $36,000 SUV. The lease quote is 36 months, a 58% residual, money factor 0.0021 and $2,000 at signing: $434.88 a month, $17,656 in all. The loan is 6.9% over 60 months with $4,000 down: $602.50 a month.

If the SUV is worth 55% of its sticker price after three years, Sam sells it for $19,800, pays off the $13,471 still owed, and buying nets out at $19,360. Leasing saves $1,705. But if the SUV holds more than $21,505 (59.7% of MSRP), buying wins. Leasing and then buying it out would cost $18,736 net. Open this example in the tool

The same deal with tax and fees

In a state with 7% sales tax, and with a $995 acquisition fee and a $395 disposition fee, the lease comes to $20,292 and buying to $22,144. Tax raises both sides, because a buyer pays it on the whole price and a lessee on each payment. Open this example in the tool

A luxury sedan on a 72-month loan

A $52,000 sedan with a 52% residual and a higher money factor of 0.003 leases for $761.18 a month. Buying with $8,000 down over 72 months at 6.5% costs $697.61 a month. At a 50% resale value, buying saves $527; the break-even value is $25,473. Here the 72-month loan even has the lower payment, which shows why payments alone can mislead. Open this example in the tool

The break-even resale value is the number to check. Look up what three-year-old cars of the same model sell for today. If they sell well above the break-even, buying is likely to win; if below, the lease is protecting you from depreciation.

Over the same number of months, a lease usually has the lower payment, because you only pay for part of the car's value. That is why the fair comparison is total cost over the same months, not the payment.

The compare card splits each lease payment into depreciation and rent charge, the same split a lease disclosure shows under federal consumer leasing rules (CFPB, Regulation M). A rent charge much higher than your loan's interest suggests the money factor has been marked up, which you can negotiate.

The FTC notes that most leases cap mileage at 15,000 miles a year or less, and that ending a lease early can bring a substantial charge (FTC, financing or leasing a car). Neither is in these totals, so add any extra-mile charges you expect to the lease side.

• Comparing payments, not totals. A lease payment is usually lower by design, and a long loan can make a loan payment look small. Compare what each costs over the same months.
• Forgetting the car you keep. A loan payment is not all cost. Part of it builds equity, which comes back when you sell.
• Putting a lot down on a lease. It lowers the payment but barely changes the total. If the car is totaled early, that money is usually gone.
• Reading the money factor as a rate. 0.0021 is not 0.21%. Multiply by 2,400 to compare it with a loan APR.
• Assuming a high residual is always good. It lowers the lease payment, but it also raises the buyout price if you want to keep the car.