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Lease vs Buy Car

Lease vs Buy Car Calculator

Whether leasing or buying wins depends almost entirely on how long you keep your cars. This calculator models a chain of leases against buying and holding — investing the monthly difference so both paths use identical cash — and shows your total net cost, ending position, and break-even point.

The basics
yrs

Your holding horizon — the input that dominates this decision.

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$

Residual value is calculated off MSRP, not the negotiated price.

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Advanced: Lease terms
%

= $25,650 on this MSRP

APR % = money factor × 2400 (0.00250 ≈ 6% APR). This one ≈ 6% APR.

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$
$
$

Refunded at each lease end.

$

Leases often require fuller coverage. Leave 0 if unsure.

Advanced: Buying terms
%
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%
%
$

0 = use the curve. Curve implies $15,086 after 6 years.

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$

Applied by vehicle age to both paths — a leased car is always young.

Advanced: Taxes & shared assumptions
%

Most US states tax each monthly lease payment; a few tax the full price upfront. Set the basis to match your state.

%

Both paths invest the monthly difference, so identical money is deployed.

Coming in a future update — lease/depreciation deductions are a separate module. Talk to a tax professional.

Verdict

Over your 6-year horizon, buying works out about $7,204 cheaper than leasing a new car every 3 years.

Break-even: buying overtakes leasing after about 3.6 years of ownership.

The pivot: if you actually replace your car every 3 years anyway, leasing is much closer to break-even — try setting the horizon to 3 years.

Lease (new one every 3 years)

$640.84/mo

Due at signing
$2,641
Total net cost
$50,565
Equity at end
$0

Buy & hold 6 years

$870.76/mo

Down payment + fees
$2,000
Total net cost
$43,361
Equity at end
$15,086
Lease (serial): $50,565Buy & hold: $43,361
$0$20k$40k$60k0y1y2y3y4y5y6yBreak-even ≈ 3.6 years
Cumulative net cost (cash deployed minus investments and vehicle equity) — lower is better.

What's driving this

  • You keep cars roughly 6 years — well past a single 3 years lease. Long holding periods are where ownership wins.
  • The lease's money factor (≈6% APR) is cheaper money than your 7% loan.
  • After month 60 the loan is done — you'd own payment-free for 1 year while the lease keeps billing.
  • Depreciation does the heavy lifting on both sides: the car sheds $27,414 of value over your horizon either way — the question is who absorbs it and what your cash earns meanwhile.
Year-by-year comparison table
Year-by-year cumulative net cost for serial leasing vs buy-and-hold, with vehicle value and loan balance.
PointLease net costBuy net costAdvantageCar valueLoan balance
1 year$10,754$15,273Lease +$4,519$34,000$36,363
2 years$18,692$23,117Lease +$4,426$28,900$28,201
3 years$28,839$29,605Lease +$766$24,565$19,448
4 years$36,389$35,373Buy +$1,016$20,880$10,063
5 years$43,686$39,898Buy +$3,787$17,748$0
6 years$50,565$43,361Buy +$7,204$15,086$0

All defaults are editable estimates, not live market rates — confirm your money factor, residual value and fees with the dealer or lender before signing. Every formula is documented on the methodology page.
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How this calculator works

The model runs three calculations most lease-vs-buy tools skip. First, serial leasing: if you lease, you'll lease again — so costs include every due-at-signing, disposition fee and mileage charge across repeated leases, not just one. Second, buy-and-hold: loan payments end, maintenance rises with age, and you recover resale value at your horizon. Third, invest-the-difference: whichever path spends less each month invests the gap, so the comparison deploys identical money — the honest way to compare a cheap payment against equity.

Every formula, default and simplification is documented — with a fully worked example you can check by hand — on the methodology page. To understand the inputs, start with how car lease math works and why the break-even horizon dominates the decision.

Frequently asked questions

Is it smarter to lease or buy a car?
It depends almost entirely on how long you keep your cars. Keep them 6+ years and buying almost always wins, because you eventually drive payment-free and recover resale value. Replace every 2–3 years and leasing is competitive — you were going to absorb steep early depreciation either way. This calculator models both paths over your horizon and shows the break-even point. See the full guide.
What makes this calculator different from a simple payment comparison?
Comparing a lease payment to a loan payment is misleading — the loan builds equity, the lease doesn't. This model compares serial leasing (a new lease every term) against buy-and-hold over the same horizon, invests the monthly cash-flow difference at your chosen return so both paths deploy identical money, and nets out resale equity. The full model is documented on the methodology page.
What is a money factor and how do I convert it to an APR?
The money factor is the lease's financing rate in disguise. Multiply it by 2,400 to get an APR: a money factor of 0.00250 is about a 6% APR. Dealers rarely volunteer it — ask directly, and check it against current loan rates. More in how car lease math works.
Are the default money factor, residual and rates current market rates?
No — they are clearly-labeled, editable estimates chosen to be typical, and every default is documented with its rationale on the methodology page. Always enter the actual figures from your quote, and confirm them with the dealer or lender before signing.
Can I share or link to a specific calculation?
Yes. Every input is stored in the URL — use the “Copy shareable link” button and anyone opening the link sees exactly your scenario. The parameters are documented for direct use on the URL parameters & API page.

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