About the Lease vs Buy Car Calculator
Leasing and buying a car involve very different cost structures, and comparing them fairly means looking at total cost over your specific ownership period, not just the monthly payment. Our Lease vs Buy Car Calculator does that comparison directly.
How It Works
The calculator multiplies your monthly lease payment by the number of months in your period to find total lease cost, and separately multiplies your loan payment by the same period and subtracts the car's estimated resale value at the end - since buying leaves you with an asset, while leasing doesn't.
Formula & Methodology
The critical adjustment this calculator makes is subtracting resale value from the buying side but not the leasing side - leasing simply ends with the car returned, while buying ends with an asset you can sell or keep. Comparing raw payment totals without that adjustment structurally favors leasing every time, since it ignores the one thing buying gives you that leasing doesn't: ownership of something with residual value.
Step-by-Step: Calculating It By Hand
- 1Multiply the monthly lease payment by 12, then by the number of years, for total lease cost.
- 2Multiply the monthly loan payment by 12, then by the number of years, for total loan payments.
- 3Subtract the car's estimated resale value at the end of the period from total loan payments to find net cost to buy.
- 4Compare total lease cost against net cost to buy for the true financial comparison.
Examples
Buying wins
A $400/month lease versus a $550/month loan over 3 years, with a $14,000 estimated resale value at the end, often makes buying cheaper net of resale value, despite the higher monthly payment.
Leasing wins
If resale value is lower than expected or the ownership period is short, the math can favor leasing instead - running your specific numbers is the only way to know for sure.
Advantages
- Compares true net cost, not just monthly payment, factoring in resale value
- Works for any lease payment, loan payment, time period, and resale estimate
- Makes the 'you own something at the end' factor concrete in dollar terms
- Useful for a genuinely informed lease-versus-buy decision
Common Mistakes
- Comparing only the monthly payments without accounting for the asset you keep when buying
- Overestimating resale value, which skews the comparison toward buying
- Not accounting for mileage limits and end-of-lease fees that can add unexpected costs to leasing
- Forgetting maintenance costs differ - leased cars are typically newer and under warranty longer
Edge Cases to Watch For
- Resale value is an estimate and genuinely uncertain - using an optimistic figure skews the comparison toward buying, while a conservative figure skews it toward leasing.
- Lease agreements include mileage limits and end-of-lease wear-and-tear charges that aren't part of the base monthly payment and should be factored in for high-mileage drivers.
- Buying involves ongoing maintenance costs that typically exceed a leased car's costs, since leased vehicles are usually newer and still under warranty for more of the term.
- Sales tax treatment differs between leasing (often taxed on each payment) and buying (typically taxed on the full price upfront), affecting the true comparison in some states.
Common Use Cases
- Deciding between leasing and buying for a specific vehicle
- Comparing total cost of ownership over a specific number of years
- Understanding how resale value assumptions change the lease-versus-buy decision
- Evaluating whether a low lease payment is actually the better financial deal