Lease vs. Buy Car Calculator
Enter your deal details to see the true cost of leasing vs. buying and which option puts more money in your pocket.
Frequently Asked Questions
Is leasing or buying a car cheaper?
Leasing almost always has lower monthly payments, but you own nothing at the end. Buying costs more monthly but builds equity. Over a 10-year period, owning the same car is almost always cheaper than leasing a new car every 3 years.
What happens if I go over my lease mileage?
Most leases allow 10,000–15,000 miles per year. Going over typically costs $0.10–$0.25 per mile at lease end. If you drive more than 15,000 miles per year, buying is usually the better financial move.
What is residual value?
The residual value is the estimated value of the car at the end of the lease term, set by the leasing company. A higher residual value generally means lower lease payments — but it also means you'd pay more to buy the car at lease end.
Can I negotiate a lease?
Yes. The selling price (capitalized cost), money factor (interest rate equivalent), and residual value are all negotiable. Focusing on the selling price has the biggest impact on your monthly payment.
Is leasing worth it for business use?
For businesses, lease payments may be partially or fully deductible as a business expense, which can make leasing more tax-efficient. Consult a tax professional for your specific situation.
The real cost of leasing vs. buying over 10 years
Leasing looks cheaper on a monthly basis — and it is. But at the end of every lease you own nothing, so you start the payments again. Over 10 years, someone who leases a $35,000 car every 3 years might spend $45,000+ in lease payments and have zero equity. Someone who buys the same $35,000 car, pays it off in 5 years ($700/month), then drives it for 5 more years payment-free, spends $42,000 and owns a car worth $8,000. The buyer is $11,000 ahead — plus 5 years of payment-free driving. The math almost always favors buying for anyone who plans to hold a vehicle more than 4–5 years.
When leasing actually makes financial sense
Leasing makes the most sense in three specific situations: (1) you use the car for business and can deduct lease payments as a business expense, making the after-tax cost significantly lower; (2) you genuinely need a new car every 2–3 years for professional reasons and the depreciation on buying would be equally costly; or (3) the specific lease deal is exceptional — money factor equivalent to under 3% APR and a high residual value. Outside these scenarios, the "lower payment" of a lease is largely an illusion created by the fact that you're never building equity.
Understanding money factor: the hidden interest rate in a lease
The money factor is the lease equivalent of an interest rate, expressed as a tiny decimal (like 0.00125). To convert to APR equivalent, multiply by 2,400: 0.00125 × 2,400 = 3% APR. This is what dealers often obscure — a money factor of 0.0035 sounds small but is 8.4% APR equivalent, higher than most car loan rates. Always ask for the money factor on any lease and convert it to APR for comparison. A good lease deal in 2026 has a money factor equivalent to under 4% APR.
Depreciation: why the first 3 years of car ownership are most expensive
A new car loses about 20% of its value the moment you drive off the lot, and roughly 15% per year for the next several years. A $40,000 car is worth about $32,000 after year 1, $27,000 after year 2, and $23,000 after year 3. By year 6–7, depreciation slows dramatically. This is why buying a 2–3 year old certified pre-owned vehicle is often the best financial decision: you let someone else absorb the steepest depreciation while still getting a reliable, warranty-covered car. The worst financial move is leasing a new car every 3 years — you perpetually pay for the most expensive part of the depreciation curve while building zero equity.