Formulas and 2026 figures checked & updated: July 2026
As % of original price.
As % of original price — informational.
How to Use the Lease vs Buy Calculator
- Enter the car's purchase price and your local sales tax rate.
- Enter your buying terms: down payment amount, the loan's annual interest rate (APR), and the loan term in months.
- Enter your leasing terms: down payment (drive-off amount), monthly lease payment, and lease length in months.
- Enter the lease's residual value — the percentage of the original price the leasing company expects the car to be worth at lease-end, shown on your lease quote.
- Enter your estimated resale value if you buy, as a percentage of the original price at the point you're comparing.
- Compare the two net-cost totals. The calculator nets out remaining loan equity (resale value minus loan balance) for buying against total cash spent for leasing, since a leased car is returned with no equity. Example: on a $38,000 car, leasing at $420/month with $2,500 down often costs less than buying over just 3 years, but financing at 7.5% over 60 months with $4,000 down pulls ahead in total cost once you keep the car well past the loan's payoff date.
What This Calculator Does
The Auto Lease vs Buy Calculator compares the total net cost of leasing a car against financing and buying it over the same ownership horizon, so you can see which option actually costs less in real dollars rather than just comparing sticker monthly payments side by side.
The result depends on the inputs you control on each side: for buying, that's the car's price, down payment, loan interest rate, and loan term; for leasing, it's the down payment (often called a 'drive-off' amount), monthly payment, lease length, and the residual value the leasing company sets for the vehicle. As a rule of thumb, lease payments run noticeably lower than loan payments on the same car because a lease only charges you for the vehicle's expected depreciation over the term plus a finance charge, not its full purchase price — while a loan payment is sized to pay off the entire price. A typical new-car lease runs 24 to 36 months with mileage caps of 10,000–15,000 miles per year, while auto loans commonly run 60 to 72 months.
Use this calculator before you sign anything, to weigh a genuine financial trade-off: leasing generally wins on monthly cash flow and keeps you driving a newer car every few years, but you build no equity and must return the vehicle (or buy it at the residual value); buying costs more upfront and monthly, but every payment builds equity, and once the loan is paid off you own an asset that keeps depreciating but no longer costs you a payment. It's the tool to run whenever you're deciding between signing a new lease and financing a purchase on the same vehicle.
Formula
Buy Net Cost = Down + Σ Loan Payments − (Resale Value − Remaining Balance)Leasing's net cost is simply the down payment plus all monthly lease payments, since there's no equity to offset. Buying's remaining loan balance is calculated via standard amortization up to the comparison month.
- Resale ValueEstimated market value of the car at the comparison point
- Residual ValueThe lease's built-in end-of-term value, used to size lease payments
Examples
Example: $38,000 car, 3-year comparison
Lease: $2,500 down, $420/mo. Buy: $4,000 down, 7.5% loan over 60 months.
Over just 3 years, leasing is often cheaper since the buyer has 2 more years of loan payments left and less built-up equity yet.
Example: Extending the buy horizon past the loan payoff
Same buy terms, but you keep the car well past month 60 (loan paid off).
Buying's advantage grows the longer you keep the car after the loan is paid off, since there's no more payment while the car retains value.
Example: Comparing over a 48-month horizon that matches the loan term
Buy: $3,000 down, 6.9% APR over 48 months. Lease: $1,500 down, $350/month over 48 months.
When the comparison horizon matches the loan term, buying usually wins clearly — the loan is fully paid off, so the buyer owns the car free and clear with resale value as pure equity, while the leased car must simply be returned with nothing to show for it.
Key Terms Explained
- Interest Rate
- The percentage a lender charges on the principal, before fees. Unlike APR, the interest rate alone doesn't include origination or other loan costs.
- Amortization
- Paying off a loan through fixed payments over time. Early payments are mostly interest; later payments are mostly principal as the balance shrinks.
- Trade-In Value
- The amount a dealer credits for your old vehicle, which reduces the amount you need to finance on the new one.
- Down Payment
- The upfront cash you pay toward a purchase, reducing the amount financed. A larger down payment lowers monthly payments and can avoid PMI.
- Loan Term
- The length of time you have to repay a loan. A longer term lowers the monthly payment but increases the total interest paid.
Methodology
Buying: down payment + loan payments over the lease-term horizon, minus buyer's equity (estimated resale value at that point minus remaining loan balance). Leasing: down payment + monthly lease payments over the lease term, with no equity since the car is returned. The option with the lower net cost 'wins' over that horizon.
Frequently Asked Questions
Is it cheaper to lease or buy a car?+
Leasing usually has a lower monthly payment, but you build no equity and must return the car (or buy it at the residual value). Buying costs more upfront and monthly, but you own an asset with resale value once the loan is paid off.
What is residual value in a lease?+
The residual value is the car's predicted worth at the end of the lease, set by the leasing company. It's used to calculate your monthly payment — a higher residual value usually means a lower payment.
Does buying always win if I keep the car a long time?+
Generally yes — the longer you keep a car after the loan is paid off, the more buying's cost-per-year drops, since there's no more payment while the car still has value. Leasing resets to a new payment every 2-3 years.
Can I buy my car at the end of a lease?+
Yes — most leases include a purchase option that lets you buy the vehicle for its residual value, the amount set at the start of the lease, once the term ends. This can make sense if the car is worth more on the used market than its residual value, or if you simply want to keep driving it. Check your lease agreement for a purchase-option fee, which is typically a few hundred dollars.
What happens if I go over the mileage limit on a lease?+
Most leases cap mileage at 10,000–15,000 miles per year and charge an overage fee, typically $0.15–$0.30 per mile, when you return the car. Driving significantly more than your allotted mileage can add hundreds or even thousands of dollars to a lease's total cost, which is one reason high-mileage drivers often come out ahead by buying instead.
How much should I put down when leasing or buying a car?+
For buying, a down payment of at least 10–20% is generally recommended to avoid being 'underwater' — owing more than the car is worth — as it depreciates. For leasing, a large down payment mainly lowers your monthly payment and offers no equity benefit, so many advisors suggest putting little or nothing down on a lease and keeping that cash in savings instead.
Can I save my results?+
Yes. Use “Save results” to store a snapshot. Without an account it remains in this browser. If you log in, saved scenarios sync securely to your SmartRates account so they are available on your other devices.
How do I share my calculation?+
Click “Share” in the toolbar to copy a link (or open your device’s share sheet). The link encodes your exact inputs, so whoever opens it sees the calculator pre-filled with the same numbers and the same result.
Can I email my calculator results?+
Yes. Click “Email results” to open your default email application with the current inputs, results, and calculator link already included. Review the message and choose the recipient before sending.
Can I export or print my results as a PDF?+
Yes. Click “Export PDF” to open a clean, printable summary of your inputs and results that you can save as a PDF or print. It includes a timestamp and a link back to the calculator.
How accurate are the calculator results?+
The arithmetic follows the formula and assumptions documented on this page. The result is still an estimate because actual rates, fees, taxes, timing conventions, eligibility rules, and provider calculations can differ. Use figures from your official quote, statement, contract, or tax form before making a financial decision.
Which inputs have the biggest effect on the result?+
Rate, time, starting balance, recurring payments or contributions, and fees usually have the largest effects. Change one input at a time to create a conservative, expected, and optimistic scenario instead of relying on a single forecast.
Are taxes, fees, and inflation included?+
Only when they appear as an input or are explicitly described in the methodology. Do not assume an omitted cost is zero. Review the formula and methodology sections to see exactly what is included before comparing the result with an outside quote.
Can this calculator predict future rates or returns?+
No. A calculator projects the assumptions entered; it cannot predict market returns, inflation, variable interest rates, tax-law changes, or provider decisions. Rerun the calculation with several assumptions to understand the range of possible outcomes.
Why might my lender, bank, broker, or tax software show a different result?+
Professional systems may use daily timing, transaction dates, compounding conventions, rounding rules, account-specific fees, credits, eligibility details, or regulations that a general-purpose calculator cannot know. A small difference can be rounding; a large difference usually means an assumption or included cost is different.
Disclaimer: Calculations are for informational purposes only and do not constitute professional financial advice. Please consult with a certified professional before making financial decisions.