Leasing and buying move money on different schedules, so comparing the monthly payments alone tells you almost nothing. This calculator lines both paths up over the same number of months: the loan payment, deposit and remaining car value on one side, and the lease payments and down payment on the other, so the gap you see is the real difference in cash spent, not just cash spent per month.
Why the monthly figures alone are misleading
A lease payment is almost always lower than a loan payment on the same car, because a lease only charges you for the depreciation the car will suffer during your contract, plus a finance charge, while a loan repays the entire purchase price. Comparing those two numbers side by side without accounting for what you own at the end always makes leasing look better than it is.
The fix is to net out what buying leaves behind. Once the loan is paid off, the car still has resale value, and that value has to be subtracted from the total spent on the loan to get a fair 'net cost of buying' figure. A lease, by contrast, ends with nothing to sell, because the car goes back to the dealer.
As a rough benchmark, buying tends to win over a 4-to-6-year comparison window once resale value is credited back, while leasing can come out ahead over a shorter 2-to-3-year window, particularly for buyers who would trade in for a new car every few years regardless.
Three comparisons with different cars and terms
A 28,000 car bought with 3,000 down at 6.5% over 48 months has a payment of about 593 a month; total loan payments come to roughly 28,458, and with a 3,000 deposit added and 45% resale value (12,600) subtracted, the net cost of buying is about 18,858. The matching lease, at 340 a month with 1,500 down over the same 48 months, costs 17,820 in total. Leasing comes out about 1,038 cheaper on this deal.
A pricier 45,000 car financed with 5,000 down at 8% over 36 months carries a payment near 1,253 a month; the net cost of buying, after crediting 55% resale value (24,750), comes to roughly 25,374. A lease at 520 a month with 2,000 down over 36 months totals 20,720, again favouring the lease, by about 4,650, largely because the loan rate here is high relative to the residual credited back.
Stretch a 22,000 car to a 60-month loan with no deposit at 9%, and the payment is about 457 a month; net buying cost, after a 35% resale credit (7,700), lands near 19,701. A lease at 260 a month with 1,000 down over the same 60 months totals 16,600 — cheaper than buying by roughly 3,101, but by month 61 the leased driver has nothing, while the buyer still owns a car worth 7,700.
Where the comparison breaks down
The tool assumes the buyer sells or trades the car at the end of the comparison period for the resale percentage entered, and that the lease ends with no fees. Neither is guaranteed: mileage overage charges, wear-and-tear assessments and disposition fees at lease-end can add hundreds or low thousands of dollars that this calculator does not include, and an actual resale sale rarely fetches exactly the percentage assumed going in.
It also treats the comparison period as fixed, which understates buying's advantage for anyone who keeps a car well past the loan term. A paid-off car costs only maintenance, insurance and fuel for as long as it is driven afterward, while a lease renews into another payment the moment the term ends. Run the comparison over the number of years you would realistically keep the car, not just the loan or lease length.
The loan side assumes a level, fully amortising monthly payment at a fixed rate; it does not model a balloon payment, a variable rate that resets, or a co-signed loan with different terms. If your financing has any of those features, price it separately before trusting the buy-side total.
Contract terms and regional differences
In the US, the Federal Reserve's Consumer Leasing Act disclosures require lessors to state the money factor, residual value and total payments up front, but dealers often quote the money factor as a small decimal rather than an interest-rate-equivalent, so multiply it by 2,400 to get a comparable APR before judging whether a lease rate is competitive.
Lease mileage allowances typically run 10,000 to 15,000 miles a year in the US, and overage fees of 0.15 to 0.30 per mile are charged only at lease-end, not spread across the term, so a driver who exceeds the allowance should add that lump sum manually rather than assuming this calculator has captured it.
In the UK, personal contract purchase (PCP) deals function similarly to a lease with a large optional final payment, and sales tax (VAT) is charged on the monthly rental rather than the full vehicle price the way it is on an outright purchase in many US states, which changes the comparison for business users who can reclaim VAT on a lease but not on a purchase.
Frequently asked questions
- Is it cheaper to lease or buy a car?
- It depends on the loan rate, the lease's money factor, and how much resale value the car retains. On a 28,000 car financed at 6.5% over four years against a comparable lease, leasing came out about 1,038 cheaper in total, but the buyer kept a car worth 12,600 at the end; run your own numbers because the gap flips with a lower loan rate or a longer ownership period.
- What is a money factor and how do I compare it to an interest rate?
- A money factor is the finance charge on a lease expressed as a small decimal, usually between 0.001 and 0.005. Multiply it by 2,400 to get the approximate equivalent APR, so a 0.00208 money factor is roughly a 5% rate, comparable to a loan quote for the same buyer.
- Do I get anything back at the end of a lease?
- No. A standard lease returns the car to the dealer with no equity, unlike a loan, where anything left after paying it off, minus what you still owe, belongs to you. Some leases include a purchase option at the pre-set residual value if you decide to keep the car.
- How does mileage affect a lease vs a car loan?
- A loan has no mileage limit; you can drive as much as you like and it only affects resale value. A lease typically caps you at 10,000 to 15,000 miles a year and charges 0.15 to 0.30 per mile over that at lease-end, which can turn a cheap-looking monthly payment into an expensive one for high-mileage drivers.
- Should I lease if I plan to keep changing cars every few years?
- Leasing suits that pattern well, since the calculator's advantage for leasing tends to be strongest over a 2-to-3-year window before resale value has had time to work in the buyer's favour. Buying and keeping a car for a decade almost always beats a decade of consecutive leases.
- Can I negotiate the price of a car I plan to lease?
- Yes. The lease payment is built from the negotiated selling price minus the residual value, so a lower agreed price reduces the depreciation portion of the payment exactly as it would reduce a loan amount. Dealers sometimes resist negotiating on a lease because the payment difference looks smaller per month, but the total saved over the term is the same percentage cut either way.
Sources
- Federal Reserve Board, Consumer Leasing Act (Regulation M) disclosures — Describes the mandatory federal disclosures for vehicle leases, including money factor, residual value and total payment terms, as of the Board's current Regulation M guidance.
- Consumer Financial Protection Bureau, Auto loans and leases guidance — CFPB consumer guidance on comparing auto loan and lease terms, including how financing costs and residual value affect total cost, current as published on consumerfinance.gov.