Leasing and buying are two ways to drive the same car, but they cost very different amounts once you look past the monthly payment. A lease often looks cheaper on a dealership worksheet because you are paying for depreciation over a short term rather than the full purchase price. At the end of three years, though, a buyer walks away with a car (and some equity), while a leaser walks away with nothing. This calculator puts both choices on the same footing by comparing the true net cost of each path over the exact period you plan to keep the car.
Enter your lease quote, your loan quote, the car price, and what you expect the car to be worth at the end of your planned ownership window. The result card tells you which option costs less in real dollars after accounting for the equity a buyer keeps.
How to Use
- Enter the Negotiated Car Price — the agreed sale price before tax and fees. This is used only to estimate what the car will be worth later.
- Set any Up-Front Down Payment you would pay at signing. This amount is added to both paths so the comparison stays fair; set it to zero if you are comparing two no-money-down deals.
- Type your Lease Monthly Payment from the dealer, including tax. Add the Lease Term in months — 36 is the most common.
- Type the Buy Loan Monthly Payment a bank or credit union quoted you, along with the Buy Loan APR and Buy Loan Term. The APR and term let the calculator work out how much you will still owe at the end of the comparison period.
- Set Car Value After Period — the expected resale value as a percent of the original price. After three years, most cars are worth 45%–60% of what you paid. Luxury and EV models depreciate faster; reliable Toyota and Honda models hold value better.
- Choose Compare Over — how many years you actually plan to drive this car. Leases are usually 2–3 years; if you keep cars for 8–10 years, set the window to 60 months to see how the numbers change.
The result card shows the total cash each path requires, the remaining loan balance, the car's expected resale value, the equity a buyer keeps, and the final true net cost for each.
The Math: Why "Monthly Payment" Lies
A $400 lease looks cheaper than a $600 car loan at first glance. But the two payments buy you different things.
When you lease for 36 months, every dollar you pay vanishes — you never own any part of the car. Your total lease cost is simply:
Lease net cost = down payment + lease monthly × months
When you buy, part of every loan payment repays principal. At the end of your planned period you still own a car worth real money, but you may also still owe money on the loan. So the honest number is:
Buy net cost = (down payment + loan monthly × months) − equity
where equity = car resale value − remaining loan balance.
The calculator derives the remaining loan balance from your quoted payment, APR, and term using the standard amortization formula: B_k = P(1+r)^k − PMT × ((1+r)^k − 1) / r. This is the same math lenders use on every car-loan statement.
Examples
Example 1 — The default scenario. A $30,000 car, leased at $400/month for 36 months, or bought with a $600/month loan over 60 months at 6% APR. The car is expected to retain 50% of its value after three years.
Over 36 months: the lease costs $14,400 and you return the car. The buyer pays $21,600 in loan installments, but the remaining loan balance is about $13,538 and the car is worth $15,000, leaving only $1,462 of equity. The buyer's true net cost is about $20,138 — roughly $5,738 more expensive than leasing. In this specific case, leasing wins because the buy payment is high and the car has not depreciated enough for the buyer to build meaningful equity.
Example 2 — Buying wins when you keep the car. Same $30,000 car, but the buyer puts down $3,000, finances at 4% for 60 months, and plans to keep it for 60 months (not 36). By month 60 the loan is paid off, the car is still worth around $9,000–$11,000, and the buyer drives it for several more years with no payment. Stretching the comparison window to 60 months flips the result: total cost of ownership drops sharply because the buyer owns the car free and clear.
Example 3 — Luxury cars and fast depreciation. A $60,000 luxury SUV that leases at $650/month for 36 months, but is expected to be worth only 40% ($24,000) after three years. A 60-month buy loan at 7% would run about $1,190/month. Because the car depreciates so fast, the buyer builds almost no equity while paying nearly double the monthly amount. Leasing is often the smarter move on vehicles with steep residual drops.
FAQ
Is it actually cheaper to lease or buy a car?
There is no universal answer — it depends on the numbers. Leasing wins when the monthly payment gap is large, you only keep the car a short time, and the car depreciates quickly. Buying wins when you keep the car past the loan term, put enough down to build equity, and drive few miles. Use the calculator with your own quotes to see which way the math breaks for you.
Why does the calculator subtract equity from the buy cost?
Because buying is not just a cost — it is also an investment. After three years you hold an asset you can sell or trade in. If you ignored that resale value, buying would always look far more expensive than it really is. Subtracting the equity you keep makes the two paths comparable: both end at the same moment, with you either handing the car back (lease) or owning a car worth some money (buy).
What residual value should I enter?
After three years, mainstream sedans and SUVs typically retain 45%–55% of their original price. Pickup trucks and certain Toyotas can hold 60% or more. Luxury European cars and many EVs drop to 35%–45%. The lease residual set by the financing company is a good benchmark, but used-car market values in your area at the time you plan to sell are the real number.
Does leasing hurt my credit or cost more long-term?
Leasing uses credit just like a loan, and a well-managed lease helps your score. The long-term catch is that leasing is an endless payment cycle: every two or three years you start a new lease with nothing to show, whereas a buyer eventually reaches a paid-off car. If you lease forever, you never stop making payments.
Are maintenance and insurance included in this comparison?
Not directly. Leased cars are almost always under warranty for the full term, but you still carry insurance — which is often slightly higher on a lease because the lender requires full coverage. Buying an out-of-warranty car means budgeting for repairs. This calculator focuses on the hard payment-versus-equity tradeoff; layer in your own insurance and maintenance estimates for a fully loaded comparison.
What if I drive more than my lease mileage allowance?
Most leases cap you at 10,000–15,000 miles per year and charge 25–35 cents per mile over. Heavy drivers can face thousands in end-of-lease fees. If you drive 20,000+ miles a year, buying is usually the better financial move because there is no mileage penalty.
Disclaimer
This car lease-vs-buy calculator is provided for informational purposes only and does not constitute financial, lending, or tax advice. Estimates are based on the inputs you enter and standard amortization math; actual lease and loan terms, residual values, tax treatment, and resale prices vary by dealer, lender, credit profile, region, and market conditions. Always compare written quotes directly with your dealer and lender before signing any contract.