Car Lease vs Buy Calculator
Compare the Real Monthly Cost
Lease vs Buy: The Full Picture
Leasing and buying are fundamentally different financial decisions. A lease is essentially a long-term rental — you pay for the car's depreciation during the lease term plus interest (money factor) and fees. Buying means you own an asset that retains some value.
The key insight most people miss: the longer you keep a purchased car after the loan is paid off, the cheaper it gets on a per-month basis. Those "free" years of ownership dramatically reduce the effective monthly cost.
Tips for Deciding
- Buy if you keep cars 5+ years — The math almost always favors buying if you'll keep the car well past the loan payoff. Every month without a payment is like getting a discount on the entire purchase.
- Lease if you want predictability — Leases keep you under warranty the entire time, with predictable costs and no surprise repair bills. For some, the peace of mind is worth the premium.
- Watch the mileage cap — Standard leases allow 10,000-12,000 miles/year. If you drive 15,000+, the overage charges ($0.15-$0.30/mile) can add thousands at turn-in.
- Negotiate the capitalized cost — The "cap cost" is the lease equivalent of the purchase price. A lower cap cost means lower monthly payments. Negotiate this just as aggressively as you would a purchase price.
Frequently Asked Questions
Is it cheaper to lease or buy a car?
Leasing has lower monthly payments but you never own the vehicle. Buying costs more monthly but builds equity. Over 10 years, buying is almost always cheaper — especially if you keep the car for 3-5 years after paying off the loan. Leasing only wins if you value always driving a new car.
What is the money factor in a lease?
The money factor is the lease equivalent of an interest rate. To convert it to an APR, multiply by 2,400. A money factor of .00250 equals 6% APR. Lower money factors mean less interest cost in your lease. Negotiate this just like you would a loan interest rate.
What happens at the end of a lease?
You typically have three options: return the car (and potentially pay excess mileage/wear fees), buy the car at the predetermined residual value, or trade it in for a new lease. If the car's market value exceeds the residual, buying and reselling can be profitable.
What are the hidden costs of leasing?
Common hidden costs include: disposition fee ($300-$500 when returning), excess mileage charges ($0.15-$0.30/mile over limit), wear-and-tear charges, early termination fees, and gap insurance. Factor these in when comparing lease vs buy total costs.