Car Lease vs. Buy Comparison Calculator
1. Vehicle Details
Lease Terms
Loan Terms
Lease Monthly
Total Out-of-Pocket: $0
Loan Monthly
Total Out-of-Pocket: $0
Should You Lease or Buy Your Next Car?
Deciding between leasing and buying a vehicle is one of the most significant financial choices for many households. While both options result in you driving a car, the financial mechanics and long-term ownership implications are drastically different.
How Leasing Works
When you lease a car, you are essentially "renting" the vehicle's depreciation over a set period (usually 36 months). You pay for the difference between the car's original price and its estimated value at the end of the lease (the Residual Value). Because you aren't paying for the entire car, monthly payments are typically lower.
- Pros: Lower monthly payments, drive a new car every few years, covered by factory warranty.
- Cons: No ownership equity, mileage restrictions, "perpetual" car payments.
How Buying (Financing) Works
When you buy via a loan, you are paying for the entire vehicle price plus interest. Once the loan is paid off, you own the asset outright. The car's value at that point represents your equity.
- Pros: No mileage limits, you own the asset eventually, cheaper in the long run (5+ years).
- Cons: Higher monthly payments, out-of-warranty repair costs, rapid depreciation loss.
Key Terms Explained
Money Factor: This is the lease version of an interest rate. To convert it to a standard APR, multiply the money factor by 2400. For example, a money factor of 0.00125 equals 3.0% APR.
Residual Value: This is the estimated value of the car at the end of the lease. A higher residual value results in a lower monthly lease payment because you are financing less depreciation.
Real-World Example
Imagine a $35,000 SUV with a $3,000 down payment. A 36-month lease might cost $425/month. Financing the same car for 60 months at 5.5% might cost $610/month. While the lease saves you $185 per month today, the buyer will own a vehicle worth roughly $18,000 after five years, whereas the lessee will have nothing to show for their payments once the term ends.