Car Lease vs Buy Calculator

A tool that compares the two ways to get a car over the same number of years: leasing (lower payments, no equity, return the car at the end) versus buying with a loan (higher payments, but you own an asset). It reports ending wealth for both — the equity you’d have from buying, versus what leasing’s lower payments could grow into if invested instead.

Leasing means lower monthly payments, driving a newer car more often, and factory-warranty coverage for most of the term — but strict mileage limits, wear-and-tear charges, and no equity when it ends. Buying means higher payments and more upfront cost, but you build equity, face no mileage limits, and eventually own the car outright with no payment at all.

It depends on your mileage, how long you keep vehicles, and what the freed-up cash from leasing’s lower payment would actually do if invested. This calculator runs the numbers both ways using your own rates and assumptions rather than a one-size-fits-all answer — high-mileage, long-term owners usually come out ahead buying; frequent upgraders with disciplined investing habits can come out ahead leasing.

Building zero equity — every payment goes toward depreciation and a finance charge, and you return the car at the end with nothing to show for it (unless you buy it at the residual value). Mileage limits and excess-wear charges are the other major downside; going over your allowance can cost thousands at lease-end.

A rough rule of thumb some shoppers use: a lease payment at or below about 1% of the vehicle’s MSRP is considered a strong deal, and up to about 1.5% is still reasonable — above that, the terms are likely unfavorable. It’s a quick sanity check, not a formula; this calculator’s money-factor breakdown shows the actual math behind your specific quote instead.

Mainly for business use — a portion of lease payments can sometimes be deducted as a business expense, similar to depreciation deductions on a purchased business vehicle, subject to IRS rules and limits. For personal use, there’s generally no meaningful tax advantage either way. Confirm the current rules with a tax professional for your situation.

The money factor is how lease interest is quoted, usually a small decimal like 0.00208. Multiply it by 2400 to get the equivalent APR — 0.00208 × 2400 ≈ 5%. It’s applied to the sum of the adjusted cap cost and residual value to produce the finance portion of your monthly payment; a lower money factor means a lower payment.

The residual value is the leasing company’s estimate of what the car will be worth at lease-end, usually shown as a percentage of MSRP. A higher residual means less of the car’s value gets charged to you as depreciation during the lease, which lowers your monthly payment — it also sets the price if you choose to buy the car when the lease ends.

Total ending wealth, not just the payment. A lower lease payment can look attractive on its own, but this calculator also tracks what buying’s equity is worth, and what leasing’s freed-up cash could grow into if invested — so a cheaper monthly payment doesn’t automatically mean the better financial outcome.

Not directly in the math — this calculator assumes you stay within whatever mileage allowance your lease quote already includes. High-mileage drivers should treat the lease side skeptically: exceeding the allowance typically costs 15–30 cents per extra mile, which this tool doesn’t add, and buying has no mileage limit at all.