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Lease vs Buy Calculator

Compare the total cost of leasing or financing the same vehicle. See monthly payment, out-of-pocket total, and end-of-term equity side by side.

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How to Compare Lease vs Buy Honestly

The only fair comparison between leasing and buying is total out-of-pocket cost over the same time period. Comparing monthly payments alone is misleading because the lease payment is always lower, even when the lease is the worse deal.

For buying, the total cost is: down payment + (monthly payment × months) + taxes + fees - resale value at the end. For leasing, the total cost is: down payment + (monthly payment × months) + acquisition fee + disposition fee + sales tax.

The Honest Comparison

If you plan to drive the same car for 7-10 years, compare buying (hold to year 7) vs leasing (3 consecutive leases). Leasing three times over 9 years almost always costs $15,000-$25,000 more than financing a single car.

Lease Basics

A lease is a long-term rental. You pay for the vehicle's depreciation during your time using it, plus a finance charge (called the money factor). At the end of the term, you return the car.

Typical lease terms are 24, 36, or 39 months with 10,000-15,000 miles per year. The monthly payment is 30-50% lower than financing because you are only paying for the portion of the car's value you use.

Finance (Buy) Basics

Financing means taking a loan to purchase the car outright. You make monthly principal and interest payments for a fixed term (typically 36-72 months). When the loan ends, you own the car free and clear.

Buying builds equity. Every payment reduces the loan balance, and the car retains some resale value. After 5 years on a $35,000 vehicle, you typically have $15,000-$18,000 in resale value to apply to the next car.

The Equity Factor

Equity is what buying gives you that leasing cannot. A paid-off 5-year-old car is an asset worth $15,000-$20,000 on a typical mid-priced vehicle. Lease 3 cars over 10 years and you have $0.

When Leasing Wins

Leasing is the better choice in these scenarios:

  • Low-mileage drivers: If you drive under 10,000 miles per year, you benefit from the lower payment without overage penalties.
  • Business use: Lease payments are more easily deductible for business-use vehicles than loan interest.
  • Tech-forward buyers: A new car every 3 years means always having the latest safety and tech features.
  • Subsidized lease deals: Manufacturer promotional leases (low money factor, inflated residual) are sometimes below the cost of owning.

When Buying Wins

Buying is the better choice in most long-term scenarios:

  • Long-term owners: Keeping a car 7+ years dramatically reduces per-year cost.
  • High-mileage drivers: No overage fees. You control depreciation.
  • Modifiers and customizers: Lift kits, wheels, tuning - none are allowed on a lease.
  • Budget-conscious: The lowest monthly cost over 10 years almost always belongs to a used car bought with cash or financed short term.

The Cheapest Path

Buying a 2-3 year old vehicle with a 48-month loan, then keeping it for 8-10 years total, produces the lowest cost per mile of any ownership strategy. This approach skips the steepest depreciation and maximizes the paid-off years.

Hidden Costs to Watch

Leases add several costs that do not appear on the monthly payment: acquisition fee ($500-$1,000 upfront), disposition fee ($300-$500 at lease end), excess mileage ($0.15-$0.30 per mile over the limit), and wear-and-tear charges at turn-in (dings, scratches, worn tires).

Buying has hidden costs too: sales tax (charged on full price, not depreciation), registration fees (annually, sometimes tied to value), and loan interest (especially on 72-84 month terms). But these are visible upfront.

Sales Tax on Leases vs Buying

In most US states, lease sales tax applies only to the monthly payment (effectively the depreciation), saving thousands compared to financing. Texas, Illinois, and a few others tax the full purchase price of a lease. Check your state before comparing totals.

Frequently Asked Questions

Buying is almost always cheaper long-term if you keep the car 7-10 years. Leasing is cheaper for the first 36 months of ownership but you have nothing to show for it at the end. Over a 10-year period, leasing typically costs 30-50% more than buying and holding.

Leasing is better if you drive fewer than 12,000 miles per year, want a new car every 2-3 years, prioritize lower monthly payments, use the vehicle for business (tax benefits), or need the latest tech and safety features regularly.

Compare the total out-of-pocket cost over the same period. Add the down payment, all monthly payments, taxes, and fees for both. For buying, subtract the resale value at the end. For leasing, you end with zero equity, so the total paid is your cost.

No. Lease payments cover depreciation and finance charges with no ownership stake. When the lease ends, you return the car and walk away. The only exception is a lease buyout, where you purchase the car at the residual value.

Yes, but it is expensive. Early termination fees include remaining payments, disposition fee ($300-$500), and a depreciation penalty. Some leasing companies charge 3-6 remaining payments as a flat penalty. Lease transfer services like Swapalease can help transfer the contract to another driver.

Yes. Standard leases allow 10,000, 12,000, or 15,000 miles per year. Overage fees are $0.15-$0.30 per mile at lease end. Buying higher mileage upfront at $0.06-$0.10 per mile is much cheaper if you expect to exceed the limit.

Yes, when the market value exceeds the residual. During 2021-2023 used car shortages, many leaseholders bought their cars for $5,000-$15,000 below market value. Check the residual in your contract against current market value on KBB or Edmunds before the lease ends.