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Lease vs Buy Calculator 2025

Should you lease or buy your next car? Compare monthly payments, total cost over time, and the equity you keep — money factor, residual value, and depreciation included.

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How the Lease vs Buy Calculator Works

This calculator answers the question every car shopper faces: is it cheaper to lease or to buy? It builds a realistic monthly lease payment from the three numbers that actually drive one — the vehicle price, the residual value (what the car is projected to be worth at lease-end), and the money factor (the lease world's version of an interest rate). The lease payment is the monthly depreciation plus a finance charge. Because leasing leaves you owning nothing, the tool assumes you keep leasing back-to-back over your chosen window, paying a fresh down payment each time a new lease begins.

On the buying side, it amortizes a purchase loan and then credits you with the car's resale value — what your depreciated-but-owned vehicle is worth at the end of the evaluation period — to produce a true net cost. The result is a side-by-side comparison of monthly payment, total cost, and the equity you keep, plus a chart showing how the gap evolves year by year. Defaults reflect typical 2025 figures, so the page is useful the instant it loads — just replace the numbers with the offer in front of you.

Who Benefits Most From This Calculator

  • Shoppers staring at a lease offer who want to know whether the low monthly payment is really a good deal.
  • Long-term owners deciding how many years of keeping a car it takes for buying to clearly win.
  • Anyone handed a money factor who wants to convert it to an APR and compare it against a purchase loan.
  • Budget-focused drivers weighing a lower lease payment against the equity buying builds.
  • People at lease-end sizing up whether to buy out the car or start fresh.

Who Should Look Elsewhere

This tool models a straightforward lease-versus-finance comparison. If you intend to pay cash for the car, there is no loan to amortize and you should simply compare the cash price net of resale against the lease total. The calculator also does not capture mileage-overage penalties, wear-and-tear charges, or excise/personal-property taxes that vary widely by state and driving habits — high-mileage drivers in particular should add those costs to the lease side. If you are deciding how much car you can afford rather than lease versus buy, start with the auto loan and affordability calculators first, then return here to compare ownership models.

Tax Implications of Leasing vs Buying

The biggest tax difference is how sales tax is applied. When you buy, most states charge sales tax on the full purchase price up front (or roll it into the loan). When you lease, the majority of states charge sales tax only on the monthly payment as you go, which can ease the up-front hit — though a few states still tax the full vehicle value at lease signing. The practical effect is that leasing often spreads the tax bite over the term rather than concentrating it at purchase.

For business use, the lease-versus-buy tax picture shifts. A business can generally deduct the business-use portion of lease payments each year, while a purchased vehicle is deducted through depreciation (and, for qualifying vehicles, Section 179 or bonus depreciation can accelerate that write-off). Which is more advantageous depends on the vehicle's weight, your business-use percentage, and current depreciation limits. None of these tax effects are modeled here — they vary by state and by entity — so treat the calculator's output as a pre-tax comparison and consult a tax professional for your specific situation.

Tips, Tricks & Hidden Costs to Watch

  • Convert the money factor to APR (× 2,400) — a 0.0020 money factor is about 4.8% APR; compare it directly against a purchase-loan rate.
  • Watch the mileage limit — leases cap annual miles (often 10K–15K) and charge 15–30¢ for every mile over at turn-in. High-mileage drivers should buy.
  • Scrutinize the residual value — a higher residual means lower depreciation and a cheaper lease; it is also your buyout price at the end.
  • Carry gap insurance on a lease — if the car is totaled, gap coverage pays the difference between its value and what you owe; many leases include it, but confirm.
  • Consider buying at lease-end — if the car is worth more than its residual, the buyout can be a bargain and lets you skip mileage and wear penalties.
  • Who should lease — low-mileage drivers who want a new car every few years and value a lower payment; almost everyone keeping a car long-term should buy.
  • Negotiate the cap cost, not the payment — dealers can lower a monthly payment by stretching the term or raising the money factor; always negotiate the price first.

Lease vs Buy Formula (2025)

How the lease payment is built and how total cost is compared against buying.

Lease = (Price − Residual) ÷ Term + (Price + Residual) × MoneyFactor

Example:

$35,000 car, 55% residual ($19,250), 36-month term, 0.0020 money factor

(35000 − 19250) ÷ 36 + (35000 + 19250) × 0.0020
= $437.50 + $108.50 = $546.00 / month

Variables:

Price - Negotiated vehicle price (capitalized cost)
Residual - Projected value at lease-end = Price × Residual%
Term - Lease length in months
MoneyFactor - Lease interest cost (× 2,400 ≈ APR)

Buy = amortize(Price − Down, APR, Term) · Equity = Resale − Balance

Example:

$35,000 car, $4,000 down, 6.7% APR, 60-month loan

amortize(31000, 6.7%, 60)
= ≈ $609 / month

Variables:

Down - Cash paid up front when buying
APR - Annual purchase-loan interest rate
Resale - Price × (1 − Depreciation%)^Years

LeaseTotal = Down × ReLeases + Lease × Months · BuyTotal = Down + Payments − Resale

Example:

Same car, evaluated over 6 years

Compare LeaseTotal vs BuyTotal (net of resale)
= Buying is typically thousands cheaper long-run

Variables:

ReLeases - How many times you re-lease over the window
Resale - What the owned car is worth at the end

These formulas provide the mathematical foundation for the calculations. Actual results may vary based on rounding, compounding frequency, and specific lender policies.

How We Calculate & Keep This Accurate

The lease payment is the standard depreciation-plus-finance model: depreciation is the price minus the residual spread over the lease term, and the finance charge is the sum of price and residual times the money factor. Continuous leasing assumes you re-lease each term and re-pay the lease down payment, since a lease leaves you with no asset. Buying amortizes the loan at the entered APR and credits the resale value, computed by depreciating the price at the entered annual rate over your evaluation window. Defaults reflect typical 2025 figures and are clearly editable.

We do not model mileage-overage penalties, wear-and-tear charges, state sales or excise taxes, or business depreciation deductions, all of which vary widely. Results are pre-tax estimates for planning and may differ from a dealer's official quote.

Data & Freshness

Figures reflect 2025 tax-year data.

Last updated June 9, 2026 · Maintained by the Financial Calculator editorial team.

Lease vs Buy Calculator — Frequently Asked Questions

Answers to the most common questions about leasing vs buying, money factor, residual value, mileage limits, and total cost.

Is it cheaper to lease or buy a car?

Over a short period — say one lease term of two or three years — leasing often has a lower monthly payment than financing the same car, because you only pay for the depreciation during the lease plus a finance charge, not the full price. But over the long run, buying is almost always cheaper. When you lease continuously, you make payments forever and never own anything; the moment you stop, you have nothing to show for it. When you buy, your payments end once the loan is paid off, and you keep driving a car you own free and clear, building equity you can later sell or trade in. This calculator models exactly that trade-off: it compares the total out-of-pocket cost of leasing the same class of car back-to-back against buying once and keeping it. For our default $35,000 car evaluated over six years, buying typically comes out several thousand dollars ahead, because after the loan is retired you still own a depreciated-but-valuable asset while the lessee is still writing monthly checks. The longer you keep a purchased car, the wider the gap grows in buying's favor.

What is a money factor?

The money factor is how leases express their interest cost. Instead of quoting an APR, lease contracts use a small decimal — something like 0.0020 — that you multiply against the sum of the capitalized cost and the residual value to get the monthly finance (or 'rent') charge. It is the lease world's equivalent of an interest rate, just dressed up in unfamiliar clothing. A lower money factor means cheaper financing. The figure is set largely by your credit score and by manufacturer incentives, and like an APR it is negotiable, even though many dealers present it as fixed. Because the number looks so small, shoppers sometimes ignore it, but it can quietly add hundreds of dollars to the cost of a lease. Always ask the dealer for the money factor explicitly and compare it across offers. To understand what it really costs you, convert it to an annual percentage rate by multiplying by 2,400 — a money factor of 0.0020 is roughly a 4.8% APR. If a dealer refuses to disclose the money factor, treat that as a red flag.

What is residual value?

Residual value is the lender's projection of what the car will be worth at the end of the lease, expressed as a percentage of the original price (the MSRP). It is the single most important number in a lease, because your monthly payment is driven by depreciation — the gap between the price today and the residual value at lease-end. A car with a high residual value depreciates less on paper during the lease, so the depreciation you pay for is smaller and your monthly payment is lower. That is why vehicles known for holding their value tend to lease more attractively than cars that depreciate quickly. Residual values are set by the leasing company using industry forecasts, and unlike the money factor they are generally not negotiable. The residual also matters at the end of the lease: it is the price at which you can buy the car if you choose to. If the car is actually worth more than its residual on the open market, buying it out can be a bargain; if it is worth less, you simply hand back the keys and walk away.

What are the downsides of leasing?

Leasing has real drawbacks beyond cost. The biggest is that you build no equity — every payment buys you nothing but temporary use, and at the end you own zero. If you lease continuously, you have a car payment for the rest of your life. Second are mileage limits: leases cap you at a set number of miles per year, commonly 10,000 to 15,000, and every mile over the cap costs roughly 15 to 30 cents at turn-in, which can add up to thousands for high-mileage drivers. Third is wear-and-tear: you are charged for dents, scratches, worn tires, and interior damage beyond 'normal,' a subjective standard that often surprises lessees with a bill. Fourth, you cannot freely modify the car, and ending a lease early is expensive — early-termination penalties can run into the thousands. Finally, leases require you to carry higher insurance coverage and often gap insurance. For drivers who keep cars a long time, drive a lot, or want freedom from a permanent payment, these downsides usually outweigh the lower monthly cost. Leasing rewards predictable, low-mileage, gentle use and little else.

Should I buy my car at lease end?

Whether to buy your car at lease-end comes down to one comparison: the contractual buyout price (the residual value plus any purchase-option fee) versus what the car is actually worth on the open market. If the residual was set high and used-car prices have softened, the buyout will exceed the car's real value and you should hand it back — there is no reason to overpay when comparable cars are cheaper elsewhere. But if used-car values have risen above the residual, buying out the lease can be a genuine bargain, because you are buying a car you already know, with a documented history, at a price locked in years ago. Buying out also makes sense if you have exceeded your mileage allowance or caused wear-and-tear, since purchasing the car lets you avoid the per-mile and damage penalties entirely — sometimes that alone justifies the buyout. Get an independent valuation (from a dealer quote or an online instant-offer tool) before deciding, and remember you can often finance the buyout if you do not have cash on hand. Never assume the residual equals fair value; check it.

Who should lease vs buy?

Leasing fits a narrow profile: drivers who want a new car every two or three years, who stay comfortably under the mileage cap, who keep the car in good condition, and who value a lower monthly payment and predictable maintenance over building ownership. Business owners who can deduct lease payments, and people who simply enjoy driving the latest models with the newest safety tech, also lean toward leasing. Buying suits almost everyone else, and especially anyone who keeps cars a long time — the longer you hold a purchased car past the loan payoff, the cheaper per year it becomes, since you drive for free except for upkeep. High-mileage drivers should always buy, because mileage penalties wreck lease economics. Buyers who want to modify their vehicle, avoid wear-and-tear charges, or eventually be free of any car payment should buy as well. As a rule of thumb: lease if you treat a car like a subscription you will replace soon, buy if you treat it like a durable asset you will use for years. This calculator lets you test your own holding period to see which side you fall on.

How does the money factor convert to APR?

Converting a money factor to an annual percentage rate is simple: multiply the money factor by 2,400. So a money factor of 0.0020 equals roughly a 4.8% APR, 0.0025 is about 6%, and 0.0033 is around 8%. The reason for the magic number 2,400 is that the money factor is an extremely compressed expression of the monthly interest cost; multiplying by 2,400 (which is 12 months times 200) scales it back up into a familiar annual rate. This conversion is the single most useful trick a lease shopper can know, because it lets you compare a lease's financing cost directly against the APR you would pay on a purchase loan. If a dealer offers you a money factor of 0.0035, you can instantly see that is about 8.4% APR — and if you could finance the same car at 6%, the lease's financing is actually more expensive on a rate basis. Always run this conversion before signing. Going the other direction, divide an APR by 2,400 to estimate the equivalent money factor, which helps you sanity-check whether a quoted money factor is reasonable for your credit tier.

What is the total cost difference over time?

The total cost difference between leasing and buying widens steadily the longer you keep a car, and that is the central insight this calculator is built to show. In the first two or three years, leasing and buying can look similar or even favor leasing, because the lease payment covers only depreciation and the buyer is still paying down a loan with little equity built. But once the purchase loan is paid off, the buyer's monthly cost drops to nearly zero while the lessee keeps paying — and re-paying a fresh down payment every time a new lease starts. Over six years with our defaults, buying typically saves several thousand dollars in net cost; stretch the comparison to nine or twelve years and the gap can grow into the five figures, because the owner is essentially driving for the price of maintenance while the perpetual lessee never stops paying. The 'net cost' figure here also credits the buyer with the car's resale value, which leasing never provides. Use the years-to-evaluate control to find your personal break-even point: the shorter your holding period, the closer leasing comes; the longer you keep the car, the more decisively buying wins.
US Lease vs Buy Calculator User Reviews

Disclaimer: Results are estimates for planning only and do not constitute tax, legal, lending, or investment advice. Actual paycheck and tax outcomes can vary based on employer settings, local rules, and personal elections. Consult a qualified US tax professional, CFP, or attorney before making financial decisions.