Car Lease vs Buy Calculator
Compare monthly payments, total cost over the lease term, and remaining equity to decide whether leasing or buying makes more financial sense.
Lease vs Buy — Key Differences
| Lease | Buy | |
|---|---|---|
| Monthly payment | Lower (pay only depreciation) | Higher (pay full price) |
| Ownership | None — return at end | Full ownership after payoff |
| Mileage limit | 10,000–15,000 mi/yr typical | Unlimited |
| Customisation | Restricted | Unrestricted |
| End of term | Return, buy, or re-lease | Keep or sell — retain equity |
| Long-term cost | Higher (perpetual payments) | Lower (equity builds) |
Frequently Asked Questions
How is a car lease payment calculated?
Lease payment = Depreciation fee + Finance fee. Depreciation fee = (Cap Cost − Down − Residual Value) / Term months. Finance fee = (Cap Cost − Down + Residual) × Money Factor. The money factor is the lease equivalent of an interest rate: multiply by 2,400 to convert to approximate APR%. A money factor of 0.00175 equals roughly 4.2% APR.
What is residual value in a car lease?
Residual value is the projected value of the car at the end of the lease term, expressed as a percentage of MSRP. A higher residual value means lower monthly payments (less depreciation to cover). For example, a Toyota RAV4 might have a 55% residual after 36 months, while a luxury sedan might have only 40%. Vehicles that hold value well have high residuals.
Is it better to lease or buy a car?
Leasing makes sense if you: want lower monthly payments, like driving a new car every 3 years, drive fewer than 12,000–15,000 miles/year, don't want to worry about long-term reliability. Buying makes sense if you: want to build equity, drive a lot (mileage penalties on leases), keep cars long-term (>5 years), or want to customise the vehicle.
What is a money factor in a car lease?
The money factor is the finance charge built into a lease, analogous to an interest rate. It is expressed as a small decimal (e.g., 0.00125). To convert to approximate APR, multiply by 2,400: 0.00125 × 2,400 = 3.0% APR. Negotiate the money factor just like you would negotiate an APR on a loan. You can check current money factors at enthusiast forums for your specific vehicle.
What are the hidden costs of leasing?
Key lease costs beyond the monthly payment: acquisition fee ($595–900, charged upfront or rolled in), disposition fee ($300–500 at lease end), excess mileage charges ($0.15–0.30/mile over limit), excess wear charges, and gap insurance (often required, $200–400/year). Some dealers offer 'lease deals' that shift these costs into higher cap costs or higher money factors.