Car Lease vs. Buy Calculator

Vehicle & Terms

Money factor × 2400 = APR. A factor of 0.00229 is about 5.5%.

Vehicle price

Term to compare

months

Lease — down payment

Lease — residual valuePercent of price the car is worth at lease end

Lease — money factor

Buy — down payment

Buy — loan APR

Buy — loan term

months

Resale value at comparison date

CHEAPER OPTION

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Lease — monthly—

Buy — monthly—

Lease — total cost—

Buy — net cost—

Lease depreciation charge—

Lease finance charge—

Equity you keep when buying—

Difference over the term—

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A lease payment buys depreciation, not a car

Lease payments have two parts. The depreciation charge is the value the car loses during your term — price minus residual, divided by the months. The finance charge is (price + residual) × money factor, which is interest on the average capital outstanding. Together they explain why the payment is lower: you are only paying for the slice of the car you use.

Money factor is a disguised interest rate

Multiply it by 2,400 to get the APR. A money factor of 0.00229 is 5.5%. Dealers quote the factor rather than the rate, which makes rate shopping harder than it should be — convert it before comparing anything.

Buying only wins if you count the equity

At the end of a three-year loan you still owe money but you own an asset. The honest figure is net cost: everything paid out, minus the resale value, plus any remaining loan balance. Comparing gross payments alone is what makes leasing look cheaper than it is.

Where leases genuinely win and genuinely lose

Leasing suits low annual mileage, a strong preference for being under warranty, and business use where payments are deductible. It punishes high mileage — excess charges run 15–30 cents a mile — and it punishes anyone who keeps cars a long time, because the cheapest years of ownership are the ones after the loan ends.

Frequently Asked Questions

Is leasing or buying cheaper in the long run?

Buying, almost always, provided you keep the car well beyond the loan term. The expensive years are the first three, which is exactly the window a lease covers. Over a single three-year term the gap is often small; over ten years it is large.

What does money factor mean?

It is the lease equivalent of an interest rate, expressed as a small decimal. Multiply by 2,400 to convert to APR: 0.00125 is 3%, 0.00229 is 5.5%, 0.00375 is 9%. Always convert before comparing lease offers.

What is residual value?

The percentage of the original price the leasing company estimates the car will be worth at lease end. A higher residual means less depreciation to pay for and a lower monthly payment — which is why cars that hold value lease well.

What happens if I exceed the mileage allowance?

You pay an excess charge, typically 15–30 cents per mile. Ten thousand miles over a 36-month lease at 25 cents is $2,500 due at the end. If your mileage is high or uncertain, that risk alone often decides the question.