Lease vs Buy Payment Calculator
Monthly payments
- Loan (60 months)
- $737
- Lease (36 months, with tax)
- $535
Real cost over the 36-month lease term
Leasing costs $199 less
| Lease: down + payments + turn-in fee | $22,669 |
|---|---|
| Buy: down + 36 loan payments | $29,527 |
| minus your equity at month 36 (car $23,200 − loan $16,541) | −$6,659 |
| Buy: net cost | $22,868 |
Lease payments are lower because you pay only for the $12,695 the car is expected to lose, plus a rent charge equal to about 6.0% APR. Buying costs more each month but leaves you with a car worth $23,200 at month 36; keeping it past the loan, payment-free, is where buying pulls further ahead. Not included: mileage overage charges (often $0.15–0.25 a mile), wear-and-tear fees, insurance differences and repairs after the warranty.
Compare leasing a car with buying it on a loan: the monthly payment for each, and the real cost over the lease term once the equity you would own after the same number of loan payments is counted, with money factor, residual value and lease fees included.
Formula
Worked Example
The lease charges for the $12,695 the car is expected to lose over 36 months plus a rent charge equal to about 6% APR. Buying costs $29,527 over the same period, but you own a car worth $23,200 with $16,541 left on the loan, so the net costs end up within $200 of each other.
Frequently Asked Questions
What is a money factor on a car lease?
The lease's interest rate in another form: multiply it by 2,400 to get the approximate APR. A money factor of 0.0025 is about 6%. Dealers can mark it up, so ask for the buy rate and compare.
Is it better to lease or buy a car?
Leasing suits drivers who want a new car every few years, drive less than the mileage limit and keep the car in good condition. Buying costs less over time if you keep the car well past the loan, because the years without payments are where ownership pulls ahead.
What fees come with a lease?
An acquisition fee at the start (often around $600–$1,000), a disposition fee at turn-in (around $300–$500), charges for miles over the limit (commonly $0.15–$0.25 a mile) and for excess wear. Most leases require gap insurance, which is often built in.