Lease vs buy
Cash out-of-pocket, the two options look close — that's why the choice feels hard. The difference is the equity at the end: the buyer has a car they can sell; the leaser hands the keys back. Whether that equity actually closes the gap depends entirely on what you think the car will be worth at horizon. This calculator surfaces the assumption explicitly.
Last updated 2026-05-13
- Monthly payment
- $553/mo
- Upfront (down + acq + tax)
- $2,700
- All payments × 36 mo
- $19,916
- Net cost (no equity)
- $22,616
- Monthly payment
- $804/mo
- Down + payments × 36 mo
- $30,941
- Expected resale
- $24,000
- Loan balance at horizon
- $17,956
- Equity (resale − balance)
- $6,044
- Net cost (after equity)
- $24,897
MethodologyWhat this calculator does (and what the dealership won't tell you)
What this calculator does (and what the dealership won't tell you)
The lease formula: monthly = depreciation fee + finance fee. Depreciation = (cap cost − residual) / lease months. Finance = (cap cost + residual) × money factor. Pre-tax monthly is added then taxed (or, in CA/HI/KY/MI, tax goes on the full cap cost upfront — toggle in the form). Money factor × 2400 ≈ APR%; convert in your head.
Residual is set by the manufacturer (or captive finance arm) before the lease. They benefit from high residuals — it lowers the monthly payment, makes the lease look attractive — but they take the risk if the actual market value drops below the residual at lease end. When residuals are generous relative to true market value, leasing tends to win. When residuals are conservative, buying wins.
The equity number is the whole game.Buy and lease payments end up similar over 3 years for similar cars. The buyer's advantage is having $X of equity (resale value minus remaining loan balance) at the end. If that $X is large, buying clearly wins. If it's small (heavy depreciator like a luxury EV), leasing can win because the manufacturer is overpaying for the residual risk.
Why the "no cash down on a lease" rule: if you total a leased car, insurance pays the residual value and the lease ends. Your down payment is gone. With a financed buy, gap insurance + loan payoff is the same risk but you can recover the down payment via the normal claim. Industry-standard guidance is: keep lease down payments near zero, even if it raises the monthly.
Mileage limits we don't model: standard leases cap at 10-12k miles/year. Overage fees are typically $0.15-0.30/mile. If you drive 18k/yr the typical 10k/yr lease is $1,200-$2,400/yr in hidden cost. Negotiate a higher-mileage lease upfront — far cheaper than paying overage at turn-in.
Wear-and-tear charges we don't model:excess wear billing at lease return is real money — chips, dents, interior wear can rack up $500-$2,000+. Most lessees underestimate this. Buyers absorb wear in their resale price, but it's less itemized.
When leasing makes sense:(1) business write-off where you can deduct the full payment, (2) cars that depreciate hard (luxury, certain EVs), (3) want-the-newest-car-every-3-years lifestyle preference where you've done the math and accepted the cost.
When buying makes sense: (1) you keep cars 5+ years — payment-free years 5-10 dominate, (2) high-residual cars (most Toyota, Honda, well-trimmed mid-trim Hondas, certain trucks), (3) high-mileage drivers, (4) you have the cash to buy outright (no APR drag).