Lease vs Buy Calculator

Compares total cost of leasing a vehicle against financing a purchase over the same period. Lease inputs: monthly payment, term, mileage allowance, residual value, money factor. Purchase inputs: price, down payment, interest rate, term, expected resale value.

Output shows total out-of-pocket cost, equity position at term end, and per-mile cost. Purchase typically wins on long-term cost; lease wins on lower monthly cash flow and easier turnover.

Lease economics break down into three parts: depreciation (residual value subtracted from capitalized cost), money factor cost (interest equivalent on the average outstanding balance), and fees (acquisition fee, disposition fee, registration). Monthly lease payment = (depreciation + finance charge + tax) / term. The depreciation portion dominates for vehicles with poor residuals; the finance charge dominates for high-money-factor leases on luxury cars at full sticker.

A worked example for a $45,000 SUV, three-year comparison. Lease: 0.00200 money factor (4.8% APR equivalent), $27,000 residual (60% retention), $500 acquisition fee, 36 months. Monthly: roughly $570 plus tax. Three-year cost: $20,520 plus fees. Purchase: $5,000 down, 6% interest over 60 months, $24,000 expected resale at month 36. Three-year cash out: $5,000 down + 36 × $773 = $32,828. Equity at month 36: $24,000 resale − $14,640 remaining loan balance = $9,360. Net three-year cost: $32,828 − $9,360 = $23,468. The example shows lease is cheaper over 3 years by $2,948 (ignoring fees) but leaves the buyer with no equity at term end.

Mileage caps shape the practical comparison. Standard leases include 10,000–15,000 miles per year; overage is billed at $0.15–$0.30 per mile at lease end. A driver covering 25,000 miles per year on a 12,000-mile lease faces 39,000 excess miles over three years, $5,850 to $11,700 in overage. The penalty often reverses the per-month cash flow advantage. Buyers face no mileage cap but absorb the depreciation impact at resale; high-mileage vehicles depreciate faster.

The decision often comes down to behavior, not math. Drivers who replace vehicles every 2–3 years lease economically in many cases — the higher per-mile cost is offset by avoiding the worst depreciation years. Drivers who keep vehicles 8–10 years almost always benefit from buying; the financing period ends and they drive a paid-off vehicle for years. The middle case (4–6 year ownership) is where individual circumstances matter most: maintenance history, residual variance, and tax treatment for business use can swing the comparison either way.

Limitations: the calculator treats both options at sticker price. Real lease deals frequently include manufacturer subsidies that reduce the money factor or boost the residual; these "captive" lease incentives can make leasing artificially attractive on specific models in specific quarters. Always compare against the actual offer, not the calculated baseline.