Lease vs Buy Calculator
Compare leasing to financing a car (or similar) over the term.
Overview
A lease-versus-buy calculator compares the total out-of-pocket cost of leasing an asset against financing the same asset over the same time horizon. The most common application is cars, but the same framework applies to office equipment, real estate, and aircraft. Each path produces a different cash-flow shape: leasing trades a lower monthly payment for permanent loss of the asset at the end of the term; buying carries higher payments but yields equity in a vehicle that can be sold, traded, or kept.
A naive monthly-payment comparison favours leases almost every time, which is why the tool computes total cost net of resale value. After a 36-month financed term you own an asset that still has market value; after a 36-month lease you walk away with nothing. The honest comparison is Lease Total Payments versus Loan Total Payments − Projected Resale Value, plus differences in upfront cash, taxes, and any opportunity cost on capital tied up in a down payment.
How it works
For the buy path: monthly payment is P × (r/12) / (1 − (1 + r/12)^−n) where P is the loan principal, r is the annual interest rate, and n is the term in months. Total cost is down_payment + (monthly_payment × n) − projected_resale. For the lease path: monthly lease payment is the depreciation (cap_cost − residual) / months plus the rent charge (cap_cost + residual) × money_factor, where money factor times 2,400 approximates the equivalent APR. Total cost is due_at_signing + (monthly_lease × n) + disposition_fee.
Examples
- $35,000 vehicle, 36 months, 6% APR loan, $3,500 down, projected resale $20,000: monthly ≈ $959, total payments $34,524, net cost after resale ≈ $18,024.
- Same vehicle leased at 0.0025 money factor (6% equivalent) with a $22,000 residual: monthly ≈ $416, total cost over 36 months ≈ $18,200 net. Roughly a wash, with the lease offering lower payments.
- High-mileage driver who would face $0.25/mile in excess charges at 15,000 miles over the limit: lease total cost jumps by $3,750 — buy now clearly cheaper.
- $50,000 SUV with poor residual (45%): leasing payment swells; buying with a 60-month loan and a planned 5-year hold usually wins.
FAQ
What is "money factor"?
The lease equivalent of an interest rate. Multiply by 2,400 to convert to an approximate APR.
Are lease payments tax deductible?
For pure personal use, no. For business use a portion may be deductible, with luxury-vehicle limits.
Why is the residual value so important?
It anchors both lease depreciation and the alternative resale value on the buy side. Optimistic residuals favour leasing; pessimistic ones favour buying.
What about mileage limits?
Lease excess-mileage fees are non-trivial. Estimate honestly — many drivers underestimate their annual miles.
Should I always negotiate the cap cost?
Yes. Most leases are written on the MSRP, but the cap cost is negotiable just like a purchase price.