Car Lease vs Buy Calculator
Compare the true total cost of leasing versus buying the same vehicle.
Lease
Buy (Finance)
By Marcus Rivera | Updated April 2026
When Leasing Makes Financial Sense
Leasing isn't inherently bad — it's simply a different financial tool that works better for specific situations:
- Low mileage drivers (<12,000 miles/year): Lease allowances (typically 10,000–15,000 miles/year) align with your usage and you avoid excess mileage penalties.
- Business use: Self-employed individuals and businesses can often deduct a portion of lease payments as a business expense, making leasing more tax-efficient than buying.
- Always want a new car: Leasing guarantees you're in a new or nearly-new vehicle every 2–3 years, with full manufacturer warranty coverage throughout.
- No repair hassle: Since you're always in warranty, unexpected repair costs are rare. When the lease ends, you simply return the car.
When Buying Is the Better Choice
- High mileage drivers: If you drive 18,000+ miles per year, excess mileage fees ($0.15–0.25/mile) can add thousands to your lease cost at return.
- Building equity: Loan payments build equity in an asset you own. Lease payments build zero equity — you're essentially renting the depreciation.
- Modifications wanted: Leased vehicles must be returned in factory condition. Buyers can modify freely.
- Long-term cost efficiency: After a loan is paid off, you own the vehicle outright. Years 6–10 of ownership are essentially "free" (excluding maintenance), whereas leasing requires perpetual payments.
Hidden Costs of Leasing Most People Miss
| Hidden Cost | Typical Amount |
|---|---|
| Disposition fee (return the car) | $300–$500 |
| Excess mileage penalty | $0.15–$0.25 per mile over |
| Wear-and-tear charges | $100–$1,500+ at end |
| GAP insurance (often required) | $200–$400 added to deal |
| Acquisition fee | $500–$1,000 upfront |
These costs rarely appear in the advertised lease payment. Always ask for the full money factor, residual value, cap cost, and all fees before signing.
The 3 Numbers That Matter in a Lease
- Money Factor: The lease equivalent of an interest rate. Multiply by 2,400 to get the approximate APR equivalent. Example: money factor of 0.00125 × 2,400 = 3% APR. Never lease without knowing this number.
- Residual Value (%): The percentage of MSRP the manufacturer predicts the car will be worth at lease end. Higher residual = lower monthly payment. A 60% residual on a $35,000 car means the leased portion is only 40% ($14,000).
- Cap Cost (Capitalized Cost): The negotiated selling price of the vehicle. Yes, you can and should negotiate the cap cost — it directly reduces your monthly payment. A $2,000 cap cost reduction on a 36-month lease saves ~$55/month.
Example calculation: $35,000 car, 60% residual ($21,000), money factor 0.00125, 36 months. Depreciation portion: ($35,000 − $21,000) ÷ 36 = $389/mo. Finance charge: ($35,000 + $21,000) × 0.00125 = $70/mo. Total before tax: $459/mo.
Frequently Asked Questions
What is a money factor?
A money factor is the leasing industry's way of expressing the interest rate on a lease. To convert to APR, multiply by 2,400. A money factor of 0.0018 equals roughly 4.3% APR. Dealers don't always volunteer this number — ask for it directly.
Can I negotiate a car lease?
Absolutely. You can negotiate the capitalized cost (vehicle price), and sometimes the money factor (rate), but the residual value is set by the manufacturer and non-negotiable. Reducing the cap cost by $1,000 saves roughly $28/month on a 36-month lease.
What happens at the end of a car lease?
You have three options: return the vehicle (and pay any fees), buy it at the predetermined residual price, or trade it in at a dealership that takes lease returns. The buy-out price is fixed in your contract — if the market value exceeds the residual, buying out can be a great deal.
Is it worth buying out a lease?
It can be — especially in a strong used car market. If the residual value in your contract is $22,000 but the car is worth $26,000 on the open market, buying out and selling (or keeping) nets you $4,000 in equity. Check market prices 3–6 months before your lease ends.
What is a lease-end inspection?
Before or at return, the leasing company inspects the vehicle for excess wear. Minor scratches, small dings, and interior wear within normal guidelines are typically waived. Significant damage — large dents, tire damage, interior stains — will result in charges. Schedule a pre-return inspection 60–90 days out so you have time to address issues affordably.