Compare the true total cost of leasing versus buying a car — payments, down payment, and what you own at the end.
“Should I lease or buy?” is the most expensive question in the dealership — and the salesperson’s answer is whichever one sells the car today. Our free Lease vs Buy Calculator answers it with arithmetic: enter the down payment, the lease payment and term, and the loan payment and term, and it totals both paths side by side — including the uncomfortable truth that the lease’s lower number comes with zero equity at the end.
The default example — a $30,000 car with $3,000 down — shows the classic shape of the decision: lease: $350 × 36 months = $15,600 out of pocket, car returned; buy: $520 × 60 months = $34,200 out of pocket, car owned. Leasing looks $18,600 cheaper — until you remember the buyer owns a five-year-old car worth roughly $12,000–$15,000 while the lessee owns nothing and needs another car. The calculator lays the totals bare so you can weigh cash flow against ownership honestly.
This comparison matters because the two options are engineered to feel different: leases advertise the low monthly payment, loans advertise ownership. Neither advertisement mentions that a perpetual lessee pays for cars forever while a buyer’s payments eventually stop. The math below makes the trade visible.
A lease is a long-term rental with extra steps. You pay for the car’s depreciation during the lease term — the difference between its price today and its predicted residual value at lease end — plus interest (called the money factor), taxes, and fees. A $30,000 car expected to be worth $18,000 in three years has $12,000 of depreciation; spread over 36 months that’s ~$333/month before interest and fees — hence the $350 payment. At the end, you return the car (or buy it at the residual price). You never build equity; you pay for the steepest-depreciation years of the car’s life, which is exactly why the payment is low.
Buying (financing) means the payments build equity — each payment reduces what you owe, and when the loan ends the car is yours. The monthly payment is higher because you’re paying for the whole car, not just three years of depreciation. But after month 60 in the default example, the payments stop and you own an asset worth roughly 40–50% of its original price — $12,000–$15,000 on a $30,000 car — which you can drive payment-free for years or sell.
The honest comparison is therefore total out-of-pocket minus ending asset value. Lease: $15,600 spent, $0 asset → net cost $15,600 for three years of driving. Buy: $34,200 spent over five years, ~$13,000 asset remaining → net cost ~$21,200 for five years of driving, or ~$12,700 per three-year-equivalent — actually cheaper per year of driving than the lease, before counting the payment-free years 6+. The calculator shows the raw totals; the article shows how to finish the analysis.
Key terms:
For the full economic comparison, subtract the car’s remaining value from the buy total: net buy cost ≈ $34,200 − ~$13,000 residual ≈ $21,200 over five years.
$3,000 down; lease $350 × 36 months; loan $520 × 60 months.
Per year of driving, buying wins even before the payment-free years — the lease’s low monthly payment is an illusion created by comparing 36 months against 60.
Same car, but you drive 18,000 miles/year. Lease terms allow 12,000/year; excess miles cost $0.25 each.
Mileage penalties are where leases quietly become expensive — always price your real annual miles, not the advertised allowance.
Consider two drivers over 12 years. The serial leaser takes a new $350/month lease every three years: four leases × ($3,000 down + $12,600 payments) = $62,400 spent, zero assets, always driving a new car. The buyer finances one $30,000 car for five years ($34,200 total), then drives it payment-free for seven more years, spending ~$1,200/year on extra maintenance in the later years (~$8,400). Total: ~$42,600 — and still owns a 12-year-old car worth ~$4,000. The buyer spent $20,000 less over 12 years. The leaser’s premium bought perpetual newness, warranty coverage, and no repair surprises — real benefits, but now priced: about $1,650/year for the privilege of always driving new.
Second scenario: the business owner. She leases because the lease payment is simpler to deduct as a business expense and she needs a reliable, image-appropriate car with zero downtime. For her, the lease’s premium is a business cost against revenue — and the tax treatment can erase much of the gap. The calculator’s verdict (“buying wins on dollars”) is correct for personal finance but incomplete for business use, where deductibility and cash-flow timing change the math.
Third: the cash-flow-constrained buyer. He can afford $350/month but not $520. The calculator says buying is cheaper long-term — true, but irrelevant if the loan payment doesn’t fit the budget. His real options are (a) lease now, (b) buy a cheaper $20,000 car at ~$370/month, or (c) wait and save a bigger down payment. The calculator compares two specific deals; it doesn’t bless unaffordable ones — option (b), the cheaper car, usually beats both.
Fourth: the lease-end buyout. Her three-year lease ends; the residual is $18,000 but the car’s market value is $20,500 (used-car prices rose). Buying out the lease for $18,000 captures $2,500 of instant equity — the rare case where leasing first then buying wins. Conversely, if market value is $16,000 against an $18,000 residual, walk away and let the lease company eat the depreciation — that’s the lessee’s built-in put option, and it’s genuinely valuable.
Dealership economics: leases are pushed because they return customers every 2–3 years and the low payment sells more car than the buyer can afford — upselling is built into the format.
Depreciation curves: cars lose ~20% in year one and ~15%/year after; leasing charges you for exactly the steepest part. Buying and holding past year five is how owners dodge most depreciation.
EVs: rapid tech change and tax-credit pass-throughs make leasing EVs unusually attractive — the lease company claims the credit and (sometimes) passes it through as a lower capitalized cost, and you dodge battery-obsolescence risk.
Business use: lease payments are straightforward deductions; purchased cars use depreciation schedules. Consult a tax pro — the after-tax math can flip the verdict.
Insurance: leased cars require gap insurance and higher coverage limits — add ~$20–$40/month to the lease’s true cost.
Credit impact: both build credit if paid on time; a lease’s lower payment is easier to keep current, which matters more than the format.
One pattern worth internalizing: the cheapest car is the one you already own, driven payment-free. Every analysis that ends at month 36 or 60 understates buying — years 6+ of ownership are nearly free driving, and no lease can match that.
A brief history of the auto lease: car leasing grew out of fleet leasing in the 1950s–60s and reached consumers in the 1980s when manufacturers needed a tool to move metal during recessions — the low monthly payment was the original subprime innovation, making expensive cars affordable month-to-month. The 1990s SUV boom ran on leases; the 2008 crisis nearly killed leasing when residual values collapsed and lease companies took billions in losses on returned cars worth less than predicted. Today’s leases are priced with that trauma built in — residuals are conservative, money factors are real interest — which is why the calculator’s plain arithmetic, not the advertisement, is the trustworthy guide.
Worked scenario — negotiating the lease like a buyer: the sticker is $30,000; the dealer offers $350/month with $3,000 down. You negotiate the capitalized cost to $27,500 (a $2,500 discount — always negotiable, though dealers pretend it isn’t). Depreciation falls from $12,000 to $9,500 over the term; monthly depreciation drops ~$70; the payment should fall to roughly $280–$290. You also check the money factor: 0.00208 × 2,400 = 5% APR — fair. And the residual: $18,000 on a car that’ll likely wholesale at $17,000 — slightly optimistic, which lowers your payments (less depreciation charged) while making the end-of-lease buyout unattractive. Three negotiated numbers — cap cost, money factor, residual — determine every lease; the monthly payment is just their shadow.
Edge cases and pro tips: single-pay leases (pay the whole term upfront) cut the money factor and can save hundreds — worth it if you have the cash and the car is a keeper for the term. Lease transfers (Swapalease, LeaseTrader) let you exit early by handing the lease to someone else — check whether your lease company allows them before signing. Wear-and-tear charges at return ($500–$2,000 for dings, tires, mileage) are the lease’s hidden final bill — budget for them or buy the car out. And the “$0 down” advertised lease: the down payment is usually rolled into the monthly figure — run it through the calculator with $0 down and the higher payment to compare honestly.
When this calculator is the wrong tool: it totals payments but excludes insurance differences, maintenance (leases are under warranty; owned cars aren’t), taxes (some states tax the full lease price; others tax payments), and disposition fees (~$350–$500 at lease end). For the tax bite specifically, run the car tax calculator — and remember that in most states you pay sales tax on the buy’s full price but only on the lease’s payments, a genuine lease advantage the payment totals hide.
Lease vs buy: lease total = down + (lease payment × months), ending with no equity; buy total = down + (loan payment × months), ending with car ownership. Honest comparison nets the car’s residual value against the buy total. Leasing buys low payments and perpetual newness; buying wins per-year-of-driving cost, especially with payment-free years after payoff. Watch mileage penalties, money factor (APR = factor × 2400), and lease-end buyout vs market value. Source: Sigma Calculator, Lease vs Buy Calculator, https://sigmacalculator.net/automotive-calculators/lease-vs-buy-calculator/
Cite this page as: Lease vs Buy Calculator, Sigma Calculator, https://sigmacalculator.net/automotive-calculators/lease-vs-buy-calculator/
Last updated: October 12, 2026