Car Lease vs Buy Calculator
Compare the true total cost of leasing versus buying a car over the same time period.
The lease vs buy decision is more nuanced than monthly payment comparisons. Leasing always has a lower monthly payment for the same car, but that does not make it cheaper. The right comparison is total cost over the same time period, accounting for the equity you build by buying. For most people who keep cars for 5 or more years, buying wins. For people who want a new car every 3 years and hate maintenance surprises, leasing may be the better fit despite the higher long-term cost.
Leasing is essentially renting. At lease end you have no asset and no equity. Buying builds ownership. The buy calculation subtracts the car's residual value to compare apples to apples over the same period.
Why monthly payment comparisons mislead
A lease payment on a $38,000 car looks much cheaper than a purchase payment because you are only paying for the depreciation during the lease term, not the full vehicle value. But at lease end you own nothing. The buy calculation must account for the vehicle's remaining value (equity) to be a fair comparison. This calculator compares net cost: lease total vs purchase total minus the car's value at the same point in time.
Hidden lease costs
Leases include fees that raise the true cost above the monthly payment: acquisition fee (typically $500-1,000, often rolled into signing), disposition fee at lease end ($300-500 to return the car), excess mileage charges (typically $0.15-0.25 per mile over the limit), wear and tear charges for anything beyond "normal" wear, and gap insurance cost (usually built into the payment). Calculate all of these into the total before comparing.
When leasing makes sense
Leasing makes financial sense in specific situations: you genuinely need a new car every 2-3 years, you drive low mileage (under the lease limit), you want factory warranty coverage throughout ownership, or you use the vehicle for business and can deduct the lease payments. Outside these scenarios, buying and keeping the car for 7-10 years produces significantly lower lifetime transportation cost.
Frequently asked questions
Can I negotiate a lease?
Yes. The capitalized cost (essentially the purchase price the lease is based on) is negotiable. Lower cap cost means lower payments. Also negotiate the money factor (the lease equivalent of interest rate) and the residual value. Dealers sometimes inflate the money factor to increase their profit margin.
What happens if I want to exit a lease early?
Early lease termination is expensive. You typically owe all remaining payments plus an early termination fee. Some manufacturers allow lease transfers to another party, which is the least costly exit if you find a willing transferee. Factor in the lack of flexibility before signing a 3-year lease.