Lease vs. Buy

Comparing Net Cost, Not Just Monthly Payment

Comparing a lease against a loan fairly means looking at NET cost, not just the monthly payment — because buying leaves you with an asset (the vehicle’s resale value, minus any remaining loan balance) that leasing never does. Enter a vehicle’s price, how long you want to compare leasing and buying over, and the terms for each path — down payment, loan APR and term for buying; a monthly lease payment and signing costs for leasing — and this calculator returns the net cost of each option and which one comes out ahead.

This is distinct from the Auto Lease Calculator calculator, which derives a single lease payment from a vehicle’s residual value and money factor, and Cash Back vs. Low Interest Calculator, which compares two different financing offers on the same purchase rather than leasing against buying.

The Formula

Buying’s net cost:

$$\vB{\text{Total Paid}} = \vA{\text{Down Payment}} + \text{Monthly Payment} \times \text{Months Paid}$$ $$\vD{\text{Equity}} = \vC{\text{Resale Value}} - \text{Remaining Loan Balance}$$ $$\text{Net Cost (Buy)} = \vB{\text{Total Paid}} - \vD{\text{Equity}}$$

Leasing’s net cost (no equity to subtract, since the vehicle is returned):

$$\text{Net Cost (Lease)} = \vE{\text{Lease Down Payment}} + \vF{\text{Monthly Lease Payment}} \times \text{Comparison Months}$$

Worked Example

A $35,000 vehicle compared over 36 months, expected to be worth 55% of its price at that point:

• Buy: $3,000 down, financed at 6% APR over 60 months. The monthly payment works out to about $618.65. After 36 payments, the loan still has about $13,959 remaining, and the vehicle is worth $19,250 (55% of $35,000) — equity of about $5,291. Total paid is about $25,271, so the net cost of buying is about $19,980.
• Lease: $2,000 due at signing, $400/month. Total paid over 36 months is $\vE{2000} + \vF{400} \times 36 = 16{,}400$.

In this example, leasing wins by about $3,580 over the 36-month comparison period.

Key Factors to Consider

• Mileage limits are a real cost leasing puts on you that buying doesn’t. Most leases cap annual mileage (commonly 10,000-15,000 miles/year) and charge a per-mile fee for anything over that limit — a driver who regularly exceeds a lease’s mileage allowance may find buying meaningfully cheaper in practice than this net-cost comparison alone suggests, since excess- mileage fees aren’t part of the calculation.
• This comparison ends at a fixed point in time — what happens after that point matters for the real decision. A bought vehicle can keep being driven with no more payments after the loan is paid off, while a leased vehicle must be returned, re-leased, or bought out at the end of its term — a longer time horizon generally favors buying, since it captures more payment-free years of ownership.
• Leasing typically comes with stricter wear-and-tear standards than simply owning a car outright. Excess wear charges at lease-end (for things like larger dents, stains, or worn tires) are a real cost some lessees don’t budget for — buying carries no equivalent penalty for normal use.
• A vehicle’s actual depreciation rate is the single biggest driver of which option wins. Vehicles that hold their value well tend to favor buying (more resale equity to offset the loan), while vehicles that depreciate quickly often favor leasing — the resale-value percentage entered here is worth researching for the specific make and model being considered, rather than guessing.

Common Mistakes

• Comparing only the monthly payments instead of the net cost. A lease’s lower monthly payment can look like the obvious winner, but it ignores the equity buying builds — the whole reason this calculator exists is to make that fair, apples-to-apples comparison instead.
• Guessing a vehicle’s resale value instead of researching it. Depreciation rates vary enormously by make and model — a vehicle known for holding its value shifts the comparison toward buying, while one known for fast depreciation shifts it toward leasing, so this input is worth getting right rather than assuming a generic percentage.
• Ignoring mileage limits and excess-wear charges when actually leasing. This calculator’s net cost assumes staying within a typical lease’s terms — a driver who regularly exceeds the mileage allowance or returns a car with more wear than expected will pay real costs this comparison doesn’t capture.
• Picking a comparison period that doesn’t match the real decision. A short comparison window can favor leasing simply because it doesn’t capture the payment-free years of ownership that come after a loan is paid off — match the comparison period to how long you’d actually keep the vehicle either way.

Useful to Know

• Need an estimated monthly lease payment to enter here rather than a dealer quote? The Auto Lease Calculator calculator derives one from a vehicle’s residual value, term, and money factor.
• Already decided to buy and want to work out the loan itself? The Auto Loan Calculator calculator covers the financing side in detail.
• Not sure what vehicle price actually fits your budget before comparing lease and buy terms? The Car Affordability Calculator calculator answers that question first.