Lease vs Buy Calculator

What this computes

A lease payment is almost always lower than a loan payment on the same car. That comparison is rigged: it ignores that the buyer ends up owning an appreciating-relative-to-a-lease asset, that a short lease is re-signed (drive-off cash, every time), and that the larger cash you put down to buy could have been invested instead.

This calculator puts both paths on one fixed ownership horizon. It computes the true lease monthly payment from the residual and money factor, totals every drive-off and disposition fee across however many leases the horizon needs, amortizes the purchase loan, credits the buyer with the car's resale value at the end, and charges each side the opportunity cost of the cash it ties up.

The math

The lease payment is the money-factor model:

money factor   = APR / 24
depreciation   = (adjCapCost − residual) / termMonths
finance charge = (adjCapCost + residual) × money factor
lease payment  = (depreciation + finance) × (1 + tax rate)

The two paths are then totaled over the horizon:

Lease total = Σ drive-off (per signing) + payments + opportunity cost
Buy total   = down + tax + loan paid + opportunity cost − resale value

Where adjCapCost is price minus the cap-cost reduction, residual is the car's value at lease end, and the buyer's resale value at the horizon is subtracted because it's a real asset you still hold. Opportunity cost is the cash put down compounded at your expected investment return over the horizon — money in a lease or loan isn't free even when it's "only the down payment."

A worked example

$40,000 car, 6-year horizon, 36-month lease at 6% (residual 55%, $2,000 down) vs a 60-month loan at 6.9% with $4,000 down, car worth 40% at year 6, 5% investment return.

• Lease re-signs once → drive-off cash paid twice
• Buyer's loan ends in year 5; years 5-6 are payment-free
• At year 6 the buyer still holds a $16,000 asset
• That retained value is what usually flips the verdict to buying

Leasing always wins the monthly-payment comparison. It usually loses the one that counts: total cost over the years you keep driving.

How to use this

1. Set the horizon to how long you really drive. If you keep cars 8-10 years, model that. The longer the horizon, the more buying-and-keeping pulls ahead.
2. Get the real money factor. Ask the dealer for it, multiply by 2,400 to see the APR, and enter that. A marked-up money factor is a hidden rate hike.
3. Be honest about resale. Look up your specific model's typical value at the horizon as a percent of price — luxury and EVs often depreciate faster than the 40-50% rule of thumb.
4. Test minimal lease down. Set the cap-cost reduction to $0 and absorb the higher monthly — you avoid losing prepaid depreciation if the car is totaled early.

The "leasing is cheaper" myth

Leasing markets on the monthly payment because that's the number it wins. The reasons it usually loses the total-cost comparison:

• You never stop paying. A lease has no payment-free years. A bought car has them — every month after payoff that you keep a still-valuable car is free transportation the lessee never gets.
• Drive-off cash recurs. Cap-cost reduction, acquisition, and disposition fees hit at every lease cycle. Over a long horizon that's thousands in pure friction.
• You end with nothing. The lessee's residual equity is the dealer's, not yours. The buyer's resale value is real money back.

Leasing's legitimate case is flexibility and fast-depreciating cars, not cost. If the calculator says lease wins, it's almost always because resale is weak or your money earns a lot invested elsewhere — both worth verifying.

What this calculator doesn't model

• Mileage overage and wear charges. Leases cap miles (often 10-15k/yr) and bill for excess and damage at turn-in. Heavy drivers pay materially more than modeled.
• Maintenance and repairs. A leased car is usually under warranty the whole term; a kept car incurs out-of-warranty repairs in later years. See the True Cost of Ownership calculator for that side.
• Lease buyout option. This assumes you re-lease, not buy the car out at the residual. A buyout can change the math, especially if the residual is below market.
• Business / tax deductibility. Lease vs buy has different tax treatment for business use; consult a tax professional for that scenario.