Lease vs Buy Car Calculator
Compare the true cost of leasing vs buying a car. Calculate total costs, mileage penalties, equity, and find out which option saves you more money.
Over 36 Months
Leasing Wins
Total Cost Comparison
Estimated value minus remaining loan balance at 36 months.
Leasing remains cost-effective if you drive under 14,278 miles/year. Above this, buying becomes more economical.
- •You drive under your mileage allowance
- •You want a new car every 2-3 years
- •You prefer lower monthly payments
- •You want warranty coverage throughout
- •You drive high miles (15,000+/year)
- •You keep cars for 5+ years
- •You want to build equity/ownership
- •You want to customize your vehicle
- •Lease insurance often costs more due to higher coverage requirements
- •Wear and tear charges at lease end can add significant costs
- •Early lease termination typically incurs substantial penalties
- •Buying gives you the freedom to sell whenever you want
- •Gap insurance is often included in leases but may be needed for purchases
Related Calculators
About This Calculator
Should you lease or buy your next car? With average new car prices exceeding $48,000 in 2026 and the average lease payment at $550/month vs a loan payment of $730/month, this decision can mean tens of thousands of dollars in savings or losses over your driving lifetime. The Lease vs Buy Car Calculator helps you compare the true Total Cost of Ownership between leasing and purchasing.
Here's what most people miss: Lease payments are lower because you're only paying for depreciation - the value the car loses while you drive it. But at the end, you own nothing. Over 6-10 years of serial leasing, you'll typically spend $8,000-$15,000 more than if you'd bought and kept one car for the same period.
The 2026 car market reality:
- Average new car price: $48,000
- Average lease payment: $550/month (36 months)
- Average loan payment: $730/month (60 months)
- Average car loan rate: 7.0-8.5% (varies by credit)
- Mileage overage fees: 15-25 cents/mile
The quick rule of thumb: Divide the monthly lease payment by the car's MSRP. If the result is less than 1%, it's a good deal. Above 1% suggests you're paying too much for the depreciation you're financing.
When leasing wins: You want a new car every 3 years, drive under 12,000 miles/year, want predictable costs, or need a nicer car for business with potential tax benefits. When buying wins: You drive 12,000+ miles/year, keep cars 5+ years, hate perpetual payments, or want to build equity in your vehicle.
Trusted Sources
How to Use the Lease vs Buy Car Calculator
- 1**Enter the vehicle MSRP or negotiated price**: The MSRP is the starting point for all calculations. Negotiate this down before discussing lease or loan terms.
- 2**Input your down payment and trade-in value**: A larger down payment reduces monthly payments but ties up cash. Consider if that money could earn more invested.
- 3**Set the lease terms**: Enter money factor (convert to APR by multiplying by 2400), residual value percentage, and lease duration (typically 24-36 months).
- 4**Enter the loan terms**: Input the interest rate (APR) and loan duration. Most loans are 48-72 months, with shorter terms saving interest.
- 5**Add your estimated annual mileage**: This is critical for leasing - standard is 10,000-12,000 miles/year. Be honest to avoid end-of-lease penalties.
- 6**Include expected insurance difference**: Leases often require higher coverage. Factor in any premium difference in your comparison.
- 7**Review monthly payment comparison**: See the difference in what leaves your bank account each month for each option.
- 8**Check the total cost of ownership over 6+ years**: The real comparison shows what happens when you account for equity, selling the car, or leasing another one.
Formula
Lease Payment = [(Cap Cost - Residual) / Term] + [(Cap Cost + Residual) x Money Factor]The lease payment formula has two parts: the depreciation fee and the rent charge. The depreciation fee is the difference between the capitalized cost (negotiated price minus down payment) and the residual value, divided by the lease term in months. The rent charge is calculated by adding the cap cost and residual value, then multiplying by the money factor (which is essentially the interest rate divided by 2400). For buying, the standard loan amortization formula applies: PMT = [P x r x (1+r)^n] / [(1+r)^n - 1].
Understanding Money Factor: The Lease Interest Rate Secret
What Is Money Factor?
The money factor is the lease equivalent of an interest rate, but dealers rarely explain it clearly. It's expressed as a small decimal like 0.00125 or 0.00250, making it seem insignificant. Here's the truth:
Converting Money Factor to APR:
- Money Factor x 2400 = APR
- 0.00125 x 2400 = 3.0% APR
- 0.00208 x 2400 = 5.0% APR
- 0.00292 x 2400 = 7.0% APR
Why Dealers Love Money Factor:
- 0.00250 sounds like nothing
- But that's actually 6.0% APR - higher than many car loans
- Many lessees never ask or calculate the true rate
How to Negotiate Money Factor:
- Ask for the money factor in writing
- Convert it to APR using the x2400 formula
- Compare to current auto loan rates
- Negotiate down just like you would an interest rate
2026 Money Factor Landscape:
| Credit Score | Typical Money Factor | Equivalent APR |
|---|---|---|
| 750+ | 0.00100-0.00150 | 2.4%-3.6% |
| 700-749 | 0.00150-0.00208 | 3.6%-5.0% |
| 650-699 | 0.00208-0.00292 | 5.0%-7.0% |
| Below 650 | 0.00333+ | 8.0%+ |
Key Insight: Manufacturer-subsidized leases sometimes offer 0.00001 money factor (essentially 0% interest) to move inventory. These are the best lease deals if you were going to lease anyway.
Residual Value: The Make-or-Break Lease Factor
What Is Residual Value?
Residual value is the car's projected worth at lease end, expressed as a percentage of MSRP. This number dramatically affects your lease payment because you're paying for the depreciation.
How Residual Value Affects Your Payment:
- $40,000 car with 60% residual = You pay for $16,000 depreciation
- $40,000 car with 50% residual = You pay for $20,000 depreciation
- Higher residual = Lower monthly payment
2026 Residual Value Examples (36 months, 12K miles/year):
| Vehicle | Typical Residual | Why |
|---|---|---|
| Toyota Tacoma | 65-70% | Extreme demand, limited supply |
| Honda CR-V | 60-65% | Reliable reputation |
| Porsche 911 | 58-63% | Collector appeal |
| Average Car | 50-55% | Standard depreciation |
| Luxury EV | 45-50% | Technology changes rapidly |
| Nissan Altima | 40-45% | High depreciation |
The Lease Hack: Cars with high residual values cost less to lease relative to their MSRP. A $50,000 Toyota might lease cheaper than a $40,000 Nissan if the Toyota's residual is 15% higher.
Residual Value Is Negotiable (Sort Of):
- The residual percentage is set by the leasing company
- You CANNOT negotiate the residual directly
- But you CAN negotiate the cap cost (purchase price)
- Lower cap cost = lower depreciation = lower payment
Watch Out For:
- Dealers advertising low payments with below-market residuals (you'll owe more if you want to buy at lease end)
- High-mileage packages that drastically reduce residual values
Total Cost of Ownership: Lease vs Buy Over 6 Years
The Real Comparison: Two Full Vehicle Cycles
To fairly compare leasing vs buying, you need to look at multiple years. Here's a detailed breakdown over 6 years:
Scenario: $45,000 Vehicle in 2026
Option A: Lease Two 36-Month Terms
| Cost Category | Amount |
|---|---|
| Down payment (2x) | $4,000 |
| Monthly payments (72 months x $520) | $37,440 |
| Disposition fees (2x) | $700 |
| Excess mileage (if any) | $0-2,000 |
| Total Cost | $42,140-$44,140 |
| Equity at End | $0 |
Option B: Buy and Own 6 Years
| Cost Category | Amount |
|---|---|
| Down payment | $9,000 |
| Monthly payments (60 months x $680) | $40,800 |
| Interest paid | ~$6,800 |
| Total Cost | $49,800 |
| Car Value at 6 Years (~35% of MSRP) | $15,750 |
| Net Cost (Cost - Value) | $34,050 |
The Verdict:
- Leasing cost $42-44K with $0 equity
- Buying cost $34K net after selling
- Buying saved $8,000-$10,000 over 6 years
But Wait - The Variables:
- If you drive 15K+ miles/year, buying wins bigger (no mileage penalties)
- If you want a new car every 3 years, leasing avoids selling hassle
- If car values crash (EVs?), leasing protects you
- If you can invest the down payment difference at 8%, that changes the math
The Mileage Trap: Why Standard Leases Are Designed to Cost You
Standard Lease Terms in 2026:
- 36-month term
- 10,000 or 12,000 miles per year
- Excess mileage: 15-25 cents per mile
The Average American Reality:
- Average driver: 13,500 miles/year
- Standard lease limit: 12,000 miles/year
- Annual overage: 1,500 miles
- Over 3 years: 4,500 excess miles
What That Costs You:
| Excess Miles | At 15 cents/mile | At 25 cents/mile |
|---|---|---|
| 3,000 | $450 | $750 |
| 4,500 | $675 | $1,125 |
| 6,000 | $900 | $1,500 |
| 10,000 | $1,500 | $2,500 |
| 15,000 | $2,250 | $3,750 |
Strategies to Avoid Mileage Penalties:
-
Buy Extra Miles Upfront
- Usually 10-15 cents/mile (vs 20-25 at lease end)
- Better to overestimate than underestimate
- Unused miles may be partially refundable
-
Choose Higher Mileage Packages
- 15,000 miles/year adds ~$30-50/month
- Still cheaper than end-of-lease penalties
-
Track Your Miles Monthly
- Divide annual allowance by 12
- Check odometer on the same date each month
- Adjust driving habits if running over
-
Consider Early Termination
- If you're way over, calculate buyout vs penalties
- Sometimes buying the car is cheaper than returning it
Who Should Never Lease:
- Commuters with 15,000+ mile annual drives
- Road trip enthusiasts
- Uber/Lyft drivers or delivery workers
- Anyone who can't accurately predict mileage
EVs: A Special Case for Lease vs Buy
Why Electric Vehicles Change the Calculation:
The lease vs buy calculus is fundamentally different for EVs in 2026:
Reasons to Lease EVs:
| Factor | Impact on Decision |
|---|---|
| Rapid technology changes | 2026 EVs may be obsolete by 2029 |
| Battery degradation | Uncertain long-term value |
| Range improvements | New models go 50%+ further |
| Tax credit transfer | Dealers can claim credit, lowering lease cost |
| Resale uncertainty | EV values fluctuate wildly |
The Federal Tax Credit Advantage:
In 2026, the $7,500 EV tax credit can be transferred to the dealer on a lease. This means:
- $50,000 EV with $7,500 credit
- Effective cap cost: $42,500
- Lower monthly payments than buying AND getting the credit yourself
2026 EV Lease Examples:
| Vehicle | MSRP | With Credit | Monthly Lease |
|---|---|---|---|
| Tesla Model 3 | $40,000 | $32,500 effective | ~$350/mo |
| Hyundai Ioniq 6 | $45,000 | $37,500 effective | ~$400/mo |
| Ford F-150 Lightning | $55,000 | $47,500 effective | ~$500/mo |
The Battery Concern:
EV batteries degrade over time. A 2020 EV might have 80% battery capacity by 2028. This affects:
- Resale value (major factor)
- Range (inconvenience factor)
- Warranty coverage (typically 8 years/100K miles)
The Verdict for EVs:
Leasing often makes MORE sense for EVs than gas cars because:
- Technology is evolving too fast
- Tax credits benefit leases
- Battery uncertainty affects ownership value
- You get the latest range/tech every 3 years
The Business Lease: Tax Advantages Explained
Lease Tax Deductions for Business Use:
If you use a vehicle for business, leasing offers tax advantages that can tip the decision:
Self-Employed / Sole Proprietor:
| Deduction Method | How It Works |
|---|---|
| Actual Expenses | Deduct business % of lease payment + gas + insurance |
| Standard Mileage | 2026 rate: 70 cents/mile (cannot deduct lease separately) |
Example (70% business use):
- Lease payment: $550/month × 12 = $6,600/year
- Business deduction: $6,600 × 70% = $4,620
- At 24% tax bracket: $1,109 tax savings
Corporation / LLC:
100% business use vehicles can deduct 100% of lease payments (subject to inclusion amount limits for luxury vehicles over ~$60,000).
The Depreciation Limitation:
When buying, depreciation deductions are limited by IRS Section 280F caps. In 2026:
- Year 1: $12,200 max (or $20,200 with bonus depreciation)
- Year 2: $19,500
- Year 3: $11,700
- Year 4+: $6,960
For a $60,000 car, these limits slow your deductions. Leasing may provide larger deductions faster.
When Business Lease Makes Sense:
| Situation | Recommendation |
|---|---|
| High business use (70%+) | Lease likely better for tax efficiency |
| Luxury vehicle ($60K+) | Lease avoids depreciation caps |
| High income bracket (32%+) | Tax savings more valuable |
| Need latest model for clients | Lease supports image refresh |
| Low business use (<50%) | Buy may be better (keep car, simpler) |
Caution:
Always consult a tax professional. IRS rules on business vehicle deductions are complex, and misclassification can trigger audits.
End-of-Lease Options: What Happens Next
When Your Lease Ends, You Have Three Options:
Option 1: Return the Vehicle
| Fee Type | Typical Cost | Notes |
|---|---|---|
| Disposition fee | $300-500 | Charged by most lessors |
| Excess mileage | 15-25¢/mile | Based on contract overage |
| Wear and tear | $0-2,000+ | Depends on condition |
| Excess wear waiver | $0 (if purchased) | Pre-paid insurance against damage |
Normal Wear and Tear (Usually OK):
- Minor scratches under 2 inches
- Dings smaller than a quarter
- Tire wear to 4/32" tread
- Interior stains that clean easily
Excess Wear (You'll Pay):
- Dents, scratches over 2-3 inches
- Cracked/chipped windshield
- Torn upholstery or carpets
- Missing or broken equipment
- Tires below safe tread depth
Option 2: Buy the Leased Vehicle
| Scenario | Recommendation |
|---|---|
| Market value > residual | BUY - you're getting a deal |
| Market value < residual | RETURN - don't overpay |
| Market value = residual | Neutral - consider if you like the car |
| High mileage overage | BUY - avoids mileage penalty |
| Significant damage | BUY - may be cheaper than repairs |
How to Decide:
- Check car's market value (KBB, Edmunds)
- Compare to your buyout price (residual + fees)
- Factor in any excess mileage/damage you'd owe
- Consider: do you love this car? Will you keep it 3+ years?
Option 3: Lease Another Vehicle
Many manufacturers offer "lease loyalty" incentives:
- $500-2,000 toward next lease
- Waived disposition fees
- First payment waived
- Mileage penalty forgiveness (sometimes)
The Pull-Ahead Program:
When a new model launches, manufacturers offer "pull-ahead" programs:
- End your lease 1-3 months early
- Remaining payments waived
- Must lease new vehicle from same brand
These are excellent deals if timing aligns with your needs.
Lease Negotiation Tactics
What You CAN Negotiate (And How):
1. Capitalized Cost (Purchase Price)
This is the most important negotiation. Lower cap cost = lower payment.
| Negotiation Tactic | Potential Savings |
|---|---|
| Get competing dealer quotes | $500-2,000 |
| Research invoice price | $1,000-3,000 |
| Time purchase for month/quarter end | $500-1,500 |
| Know current incentives | $500-2,000 |
2. Money Factor
While set by the captive lender, there's sometimes flexibility:
- Ask for the "buy rate" (what the dealer pays)
- Compare to current auto loan rates
- Request rate match if you have excellent credit
3. Fees
| Fee | Negotiable? | Strategy |
|---|---|---|
| Acquisition fee ($595-995) | Sometimes | Ask for reduction or waiver |
| Disposition fee ($300-500) | After lease | Waived if you lease again |
| Documentation fee ($100-500) | Yes | Varies by state law |
| Drive-off fees | Yes | Roll into monthly payment |
4. Trade-In Value
Same as buying - negotiate trade-in separately from the lease deal.
What You CANNOT Negotiate:
- Residual value percentage (set by lessor)
- Mileage overage rate (contract term)
- Wear and tear standards (lessor policy)
The One-Pay Lease Hack:
Some lessors offer single-payment leases:
- Pay entire lease upfront
- Get a lower money factor (effective rate)
- Typical savings: 5-10% vs monthly payments
Caution: If the car is totaled, you may lose the prepayment.
Red Flags to Avoid:
- Dealer won't disclose money factor
- "Just focus on the monthly payment"
- Residual value seems unusually low
- High acquisition fee (above $1,000)
- Mileage overage above 25 cents/mile
Pro Tips
- 💡Always convert money factor to APR (multiply by 2400) to understand your true interest rate - 0.00250 sounds small but equals 6% APR.
- 💡Target vehicles with high residual values (55%+) for the best lease deals - Toyota, Honda, Lexus, and Porsche typically lease well relative to MSRP.
- 💡Buy extra miles upfront at 10-15 cents/mile rather than paying 20-25 cents at lease end - it could save you hundreds to a thousand dollars.
- 💡If you plan to keep a car more than 5 years, buying almost always wins financially - you get 3-5+ years of payment-free driving.
- 💡Watch for manufacturer-subsidized lease specials with money factors near 0.00001 - these are essentially 0% interest and the best lease deals available.
- 💡Before signing, calculate your Total Cost of Ownership for both options over 6 years to see the true difference.
- 💡Never negotiate based on monthly payment alone - dealers can manipulate payment by adjusting money factor, residual, or term to hide a bad deal.
- 💡Consider that EVs may lease better than buy due to uncertain battery degradation, rapid technology changes, and transferable tax credits.
- 💡Use the 1% rule as a quick gut check: monthly payment should be 1% or less of MSRP for a fair lease deal ($500/month on $50,000 car).
- 💡Avoid putting more than $2,000-3,000 down on a lease - if the car is totaled, you lose that money (insurance pays the lessor, not you).
- 💡Get a pre-lease-end inspection 2-3 months before returning - you can fix dings and wear issues cheaper than paying lease-end penalties.
- 💡Look for "lease loyalty" and "pull-ahead" programs - manufacturers offer significant incentives to keep you in their brand, often waiving fees and payments.
Frequently Asked Questions
It depends on your priorities and driving habits. Buying is typically better if you drive more than 12,000 miles/year, plan to keep the car 5+ years, want to build equity, or hate monthly payments (once it's paid off, you drive free). Leasing may be better if you want a new car every 2-3 years, drive under 12,000 miles annually, want lower monthly payments, or prefer avoiding maintenance on older vehicles. Over a 6-10 year period, buying usually saves $8,000-$15,000 compared to serial leasing, but leasing offers predictability and always driving under warranty.
