Lease vs Buy Calculator

Enter the purchase price, down payment, loan APR, and estimated resale value alongside the lease monthly payment, cash due at signing, and end-of-lease fees over the same comparison period in months.

If you buy

If you lease

About this calculator

Compare the net out-of-pocket cost of leasing a car versus buying and financing it over the exact same time horizon, accounting for retained resale equity.

Core Mathematical Formula

Buy Monthly Payment = Amortization of (Price − Down Payment) at APR over Comparison Months
Buy Net Cost = Down Payment + (Buy Monthly Payment × Months) − Estimated Resale Value
Lease Total Cost = Due at Signing + (Lease Monthly Payment × Months) + End-of-Lease Fees
Difference = Buy Net Cost − Lease Total Cost

Verified Calculation Benchmark

Buying a $32,000 car with $2,000 down ($30,000 financed) at 6.0% APR over 36 months produces a $912.66 monthly payment ($32,855.70 in loan payments); subtracting a $19,000 resale value yields a 36-month net buy cost of $15,855.70. Leasing at $350/month with $1,500 due at signing and $400 in end fees costs $14,500.00: meaning buying costs $1,355.70 more over 36 months, but leaves you owning a debt-free $19,000 vehicle.

How to Make an Apples-to-Apples Financial Comparison Between Leasing and Buying

Comparing a monthly lease payment directly against a monthly loan payment is a classic showroom trap. At the end of a 36-month lease, you own zero equity. At the end of a loan, you own a multi-thousand-dollar asset. By auditing both contracts under the federal Consumer Leasing Act (Regulation M) and consumer guidance from the Consumer Financial Protection Bureau (CFPB), our calculator compares your true net cost after accounting for resale equity and opportunity cost.

Comparing a $420/month 36-month lease payment directly against a $680/monthloan payment is financially meaningless. When you make your 36th lease payment and hand the keys back to the dealership (plus a $395–$495 disposition fee), your net equity is exactly $0.00. When you make 36 payments on a purchased vehicle, you hold title equity in a tangible asset worth $18,000 to $25,000+ that you can either sell for cash, trade in, or keep driving payment-free for the next five years.

The Khulasa Lease vs Buy Calculator puts both options on an identical time horizon (such as 36 months) and subtracts the purchased vehicle's estimated resale value from your cumulative purchase payments, revealing the true net economic cost of buying versus leasing.

Step-by-Step Lease vs. Buy Math (Verified 36-Month Walkthrough)

Let's verify the exact math for a $32,000 crossover evaluated over a 36-month period:

  1. Purchase Side ($32,000 Price, $2,000 Down, 6.0% APR, $19,000 Resale Value after 36 Months):
    • Amount Financed: $32,000 − $2,000 = $30,000.00
    • Monthly Loan Payment (36 months at 6.0% APR, `r = 0.005`): $912.66 per month
    • Total Cash Outlay (Down + 36 Payments): $2,000 + ($912.6583 × 36) = $2,000 + $32,855.70 = $34,855.70
    • Less Retained Vehicle Resale Value at Month 36: $34,855.70 − $19,000.00 = $15,855.70 Net Buy Cost (representing $13,000.00 in depreciation plus $2,855.70 in loan interest).
  2. Lease Side ($350/Month Lease, $1,500 Due at Signing, $400 Disposition/End Fees):
    • Total Lease Payments: $350.00 × 36 months = $12,600.00
    • Total Lease Outlay: $1,500.00 signing + $12,600.00 payments + $400.00 end fees = $14,500.00
  3. Net 36-Month Cost Difference (Buy − Lease):
    $15,855.70 − $14,500.00 = +$1,355.70 (In this heavily subsidized lease promo, leasing costs $1,355.70 less over the first 36 months, whereas if the lease payment were $410/month, buying would be cheaper even over a short 3-year window!).

Decoding Dealership Lease Math: Money Factor, Residual Value, and Rent Charge

Unlike auto loans, which Federal Truth in Lending laws require dealers to quote as an Annual Percentage Rate (APR), car leases quote financing cost as a tiny decimal called the Money Factor (MF) (sometimes called the Lease Factor). To convert any lease Money Factor into its equivalent APR, multiply by 2,400:

Equivalent APR (%) = Money Factor × 2,400  |  Money Factor = APR (%) ÷ 2,400

Use the reference table below to translate dealership Money Factors into real APRs and compare how a 36-month lease versus a 60-month purchase performs over a 3-year and 6-year ownership cycle on a $38,000 vehicle:

Lease Money Factor Equivalent APR (%) Credit / Market Tier Monthly Rent Charge on $38k Cap Cost (58% Residual) 36-Month Total Rent (Interest) Paid Recommended Strategy
0.00075 1.80% APR Subvented Factory Lease Promo $45.03 / mo $1,621.08 Strong candidate for leasing ($0 cap cost reduction)
0.00150 3.60% APR Manufacturer Loyalty / EV Lease $90.06 / mo $3,242.16 Favorable lease if residual is inflated ≥60%
0.00250 6.00% APR Standard Tier-1 Captive Rate $150.10 / mo $5,403.60 Purchasing beats leasing if kept >42 months
0.00325 7.80% APR Standard Bank / Marked-Up Dealer MF $195.13 / mo $7,024.68 Negotiate base MF or finance purchase via credit union
0.00415 9.96% APR Tier-2 / Dealer-Padded Rate $249.17 / mo $8,969.98 Walk away from lease; financing or CPO purchase wins

Three Lease Contract Traps Every Driver Must Check Before Signing

  • Never Put a Large Cap-Cost Reduction (Down Payment) on a Lease: If you pay $4,500 upfront to lower your monthly lease payment and the car is totaled or stolen two months later, your auto insurance carrier reimburses the leasing bank (the legal owner) for the vehicle's market value, and your $4,500 down payment vanishes completely. Always structure a lease with only first month's payment, registration, and acquisition fee due at signing.
  • Excess Mileage Penalties ($0.20 to $0.30/Mile): Standard advertised lease specials only allow 10,000 or 12,000 miles per year. If you drive 16,000 miles/year on a 10,000-mile lease (18,000 excess miles over 3 years) at $0.25/mile, you will owe a $4,500 mileage penalty plus a $395–$495 disposition fee at turn-in. Include expected mileage penalties in the End-of-lease fees box above.
  • The 6-Year Back-to-Back Lease Trap: Leasing two consecutive cars over 6 years (72 monthly lease payments, two acquisition fees, two disposition fees) leaves you with $0 equity at Year 6, whereas buying one vehicle and holding it for 6 years leaves you with a paid-off car worth $12,000 to $18,000. Read our full teardown in How Lease Money Factors, Residual Values, and Acquisition Fees Really Work.

Official Federal & Industry Benchmark Sources

  1. Consumer Leasing Act (Regulation M) — Board of Governors of the Federal Reserve System
  2. Consumer Financial Protection Bureau (CFPB) — Consumer Financial Protection Bureau (CFPB)
  3. AAA Your Driving Costs Benchmark Methodology — American Automobile Association (AAA)

Frequently Asked Questions

Why does the calculator subtract estimated resale value from the cost of buying?

When you buy a car, your monthly loan payments build ownership equity in a physical asset. If you spend $34,855 in down payment and loan payments over 36 months and own a debt-free car worth $19,000 at the end, your net wealth reduction is only $15,855, not $34,855.

How do I estimate my car's resale value at the end of the comparison period?

Use our Car Depreciation Calculator with a 12% to 16% annual compound depreciation rate over 3 years (equivalent to a 59% to 68% residual value), or look up the exact residual value percentage printed on your dealer's lease worksheet.

What fees should I enter in 'Due at signing' and 'End-of-lease fees'?

In Due at signing, enter the total cash required on Day 1 (cap cost reduction down payment + bank acquisition fee of $595–$995 + first month's payment + upfront registration/doc fees). In End-of-lease fees, enter the lease disposition fee ($350–$495) plus any expected excess mileage or wear-and-tear charges.

How do I convert a lease Money Factor to an interest rate (APR)?

Multiply the Money Factor by 2,400. For example, a Money Factor of 0.00275 equals an APR of 6.60% (0.00275 × 2,400 = 6.60).

When is leasing mathematically smarter than buying?

Leasing can beat buying over a 24- to 36-month window when the automaker offers a heavily subsidized (subvented) Money Factor near 1%–2% APR, inflates the contract residual value above true market resale value, or passes through a $7,500 commercial EV lease cap-cost credit that the vehicle wouldn't qualify for in a retail purchase.

Related Car Calculators

Car Loan Calculator Calculate your exact monthly auto loan payment, net principal financed, total loan cost, and cumulative interest paid across any APR and loan term. Monthly Car Payment Calculator Calculate your real dealership out-the-door monthly payment with state sales tax, trade-in tax credit, and DMV/dealer fees rolled into the loan. Car Depreciation Calculator Project your vehicle's year-by-year resale value and cumulative value loss using compound declining-balance depreciation. Total Cost of Car Ownership Calculator Combine compound depreciation, fuel, auto insurance, maintenance, registration fees, and loan interest into one multi-year Total Cost of Ownership (TCO).

Related Automotive Research & Case Studies

Rolling $6,200 of Old Car Debt Into a New Loan: Why 'We'll Pay Off Your Trade' Costs $8,100 and How to Exit Cleanly The average underwater trade-in at US dealerships now carries over $6,200 in unpaid debt. When a dealer promises to 'pay off your old loan,' rolling that $6,200 into a new 72-month contract actually costs $8,928. Decoding the Lease Worksheet: Money Factors, Inflated Residuals, and Why $4,000 Down on a Lease Can Vanish Overnight Federal law does not require car leases to print an APR on the contract. Instead, dealers quote a decimal Money Factor that can disguise 9% interest rates. Here is how to audit every line of a lease worksheet. Where Does $22,000 Go? Tracking Five-Year Wholesale Depreciation Across Pickups, Hybrids, Luxury Sedans, and EVs Why do two $45,000 vehicles bought on the same Saturday return wholesale checks that differ by $12,150 five years later? We track five-year auction residual curves across pickups, hybrids, luxury sedans, and EVs.