Lease vs Buy Car Calculator — True Cost, Break-Even & Invested Difference
A first-time car buyer on r/personalfinance wrote: ‘Every calculator I find just shows monthly payments, which tells me nothing because it does not take into account for example the opportunity cost if I decide to invest the difference. How do you guys handle these big financial decisions without drowning in spreadsheets?’ (October 27, 2025). This calculator answers exactly that. It runs the full month-by-month race: serial leases (a new one every term, with every due-at-signing, acquisition and disposition fee) against buying and holding — and invests the cash-flow difference so both paths deploy identical money. The winner and the break-even year come out instantly, with no account.
How this calculator works
Lease payment = (cap cost − residual value) ÷ term + (cap cost + residual value) × money factor, where cap cost = negotiated price + acquisition fee; multiply the money factor by 2,400 for its APR equivalent. Most states tax the payment, not the car. Buy side: loan = price + sales tax − down payment, amortized with M = P·r/(1−(1+r)^−n); after the term the payments stop and the car keeps depreciating at your annual rate. Leases repeat: each new term charges due-at-signing + acquisition fee again, and each turn-in charges the disposition fee. The side spending less each month invests the difference at your return. Winner = buy equity (resale − remaining balance) vs the invested difference; break-even year = first year buying pulls ahead. Nominal dollars, before income tax; add expected maintenance/insurance differences into the depreciation or return assumptions if you want them modeled.
Scenario examples
| Negotiated car price ($) | Winner over 6 years | Break-even year |
|---|
| 20,000 | BUYING by $17,643.08 | Year 1 — buying pulls ahead |
| 30,000 | BUYING by $21,048.77 | Year 1 — buying pulls ahead |
| 40,000 | BUYING by $24,454.46 | Year 1 — buying pulls ahead |
| 60,000 | BUYING by $31,265.85 | Year 2 — buying pulls ahead |
| 80,000 | BUYING by $38,077.23 | Year 2 — buying pulls ahead |
Every number above is computed by the same in-browser engine as the calculator — nothing is hardcoded.
Why the monthly payment comparison is a trap
The lease will always win the payment contest — that is not a bug, it is the product. A $40,000 car might lease for $470 a month while the loan payment for the same car runs $800. The difference exists because a lease charges you only for the depreciation you use (price minus residual, spread over 36 months) plus a finance charge, while a loan charges you for the entire car. What the payment comparison hides is what happens at month 61. The buyer stops paying and owns a car worth $14,000-$18,000; the lessee hands the keys back, pays a disposition fee, and signs the next lease — with a fresh due-at-signing and acquisition fee. Over six years that second and third lease add roughly $2,500-$3,500 in signing costs alone that no single-lease quote ever shows. This calculator models serial leases explicitly: every re-sign charges due-at-signing plus the acquisition fee again, every turn-in charges the disposition fee, and the monthly difference between the two paths is invested at your chosen return so both sides deploy identical cash. Only then is the comparison honest.
Money factor and residual: the two numbers dealers hope you will not check
A lease quote is five numbers, and two of them decide whether the deal is good. The money factor is the interest rate in disguise: multiply by 2,400 and you get the APR equivalent — 0.0025 is 6.0%, 0.0015 is 3.6%. Captive lenders publish a buy-rate money factor monthly; dealers are allowed to mark it up, and a 0.0005 markup on a $40,000 lease costs you about $30 a month. The residual is the lender’s prediction of what the car is worth at lease end, and it moves the payment more than almost anything else: a car that holds 58% of its value leases dramatically cheaper than one that holds 48%, because you are financing 10 points less depreciation. Both numbers are set by the bank, not the dealer — if a quote will not show them, or shows a residual below the published figure, walk. Enter both into the calculator above and watch the monthly payment and the six-year verdict move; then take the same two numbers to competing dealers, because the only negotiable part of a lease is the capitalized cost (the selling price) and the money factor markup.
When leasing actually wins — and it does win sometimes
The honest answer is not “always buy”. Leasing is the cheaper path when your horizon is short (3 years or less — before the break-even year this calculator reports), when the manufacturer is subsidizing leases with a below-market money factor or an inflated residual (common on EVs and on models being replaced), when you drive under the mileage cap and keep cars clean, and when you would otherwise finance at a high APR — prime borrowers with weak loan rates but access to subvented lease money are genuinely better off leasing. Buying wins when you keep cars five years or more, drive 15,000+ miles a year, trade in before the loan is underwater, or simply want the payment to end. The third option beats both for pure cost: buy a 3-year-old car and let the first owner absorb the steepest depreciation. Run your horizon, your miles and your credit tier through the numbers above — the break-even year tells you which side of the decision your habits fall on.
FAQ
Is it cheaper to lease or buy a car?
Over 3 years or less, leasing usually wins on cash flow — lower payment, warranty coverage, no resale risk. Over 5-6+ years buying almost always wins because the loan ends and you drive payment-free while the lease keeps billing forever. Run your own horizon above: the break-even year is the honest answer.
What is a money factor?
The lease equivalent of an interest rate, quoted as a small decimal. Multiply by 2,400 to get the APR: 0.0025 = 6.0%. Dealers may mark up the buy-rate money factor, so ask for it in writing — the calculator shows the conversion next to your input.
What is residual value?
What the leasing bank predicts the car will be worth at lease end, as a percentage of MSRP. A 55% residual on a $40,000 car means $22,000. Higher residual = less depreciation to pay for = lower lease payment. It is set by the lender, not the dealer, and is non-negotiable.
Should I put money down on a lease?
Keep it minimal. A large capitalized cost reduction lowers the monthly payment but does not lower the total cost — and if the car is totaled shortly after signing, that money can be lost because gap coverage may not refund cap-cost reductions. The calculator models downLease as part of every serial lease, so you see the true cost.
Does the calculator include mileage overage fees?
Not as a separate field. Standard leases allow 10,000-12,000 miles/year at $0.15-$0.25 per excess mile. If you expect to go over, multiply your excess miles by the per-mile charge and add it to the disposition fee field — it is charged at the same moment, turn-in.
What depreciation rate should I use?
A typical new car loses about 20% in year one and 10-15% per year after, settling around 40-50% of MSRP after five years. The calculator applies one flat annual rate; use 15% for average cars, 10% for high-resale trucks (Tacoma, 4Runner), and 18-20% for EVs, which have been volatile.
Why does buying win at 6 years in most runs?
Two reasons the payment comparison hides: the loan ends (months 61-72 cost $0 while the lease still bills ~$500+), and the buyer keeps the equity — a 6-year-old car is still worth 35-45% of its price. The lease side ends with nothing but the invested difference.
Does the calculator include sales tax?
Yes, both sides. Buying: most states tax the full purchase price, which the model adds to the loan principal. Leasing: most states tax each monthly payment instead, so tax flows through every lease payment and every re-signed lease. A handful of states tax the full capitalized cost upfront — if yours does, add that amount to due at signing.
What if I want to buy the car at lease end?
Model it as buying from the start, but at the residual: the lease contract guarantees you the right to purchase the car at the residual value, which is a free option — worth real money when the market value exceeds the residual (as it did for nearly every lease in 2021-2022). Set the compare horizon to the lease term and check whether the residual is below the car’s likely market value; if it is, lease-then-buyout often beats both paths.
Is gap insurance needed?
On a lease it is usually built in by the lessor. On a loan with less than 20% down, buy it: if the car is totaled early, standard insurance pays market value while you still owe the loan balance, and the gap is yours. It costs $20-$40 a year through your auto insurer versus $400+ through the dealer.
Sources and borrower question