Car Lease vs Buy Calculator: Which Costs Less in 3 Years?

Lease $23,808.70, buy $19,047.91 net — buy wins by $4,760.79

On the defaults — $35,000.00 price, $5,000.00 down, 36 months, residual 55.00%, money factor 0.0029, $2,000.00 due at signing, $395.00 disposition fee, buy APR 6.90%, buy term 3 years — the lease payment is $594.83 a month ($437.50 depreciation + $157.33 finance) and the total lease cost is $23,808.70. Buying costs $924.94 a month, $38,297.91 out of pocket over 36 months, and the buyer keeps a $19,250.00 car at the end — so the net buy cost is $19,047.91 and BUY wins by $4,760.79. The comparison window is the lease term; the buy side’s ending equity is the residual value minus whatever is still owed on the loan.

Check the identities: residual = price × residual %; depreciation fee = (price − residual) ÷ lease term; finance fee = (price + residual) × money factor; monthly lease = depreciation + finance; total lease cost = monthly lease × lease term + due at signing + disposition fee; buy loan = price − down payment; out-of-pocket = down payment + buy payment × min(lease term, buy term); equity = residual − remaining balance; net buy cost = out-of-pocket − equity; the gap is the difference of the displayed totals. At the defaults the lease total is $23,808.70, the net buy cost is $19,047.91 and BUY wins by $4,760.79. Rounding convention: totals are computed from unrounded values, so rounded parts may differ by a cent from their rounded sum; the gap is the difference of the displayed (rounded) totals.

The worked example, line by line

Setup: $35,000.00 car, $5,000.00 down, 36 months, residual 55.00%, money factor 0.0029, $2,000.00 due at signing, $395.00 disposition fee, buy APR 6.90%, buy term 3 years.

Line 1 — the residual. $35,000.00 × 55.00% = $19,250.00.

Line 2 — the depreciation fee. ($35,000.00 − $19,250.00) ÷ 36 = $437.50/mo.

Line 3 — the finance fee. ($35,000.00 + $19,250.00) × 0.0029 = $157.33/mo.

Line 4 — the monthly lease payment. $437.50 + $157.33 = $594.83/mo.

Line 5 — the total lease cost. $594.83 × 36 + $2,000.00 + $395.00 = $23,808.70 (from the unrounded monthly lease).

Line 6 — the buy payment. $35,000.00 − $5,000.00 = $30,000.00 loan; at 6.90% over 3 years the payment is $924.94/mo.

Line 7 — the net buy cost. $5,000.00 + $924.94 × 36 = $38,297.91 out of pocket; the loan is paid off in 36 months, so the remaining balance is $0.00 and the equity is $19,250.00 − $0.00 = $19,250.00; the net buy cost is $38,297.91 − $19,250.00 = $19,047.91.

Line 8 — the winner. $23,808.70 (lease) vs $19,047.91 (buy net): BUY wins by $4,760.79.

Reverse: the money factor where the lease total ties the net buy cost is 0.0005 (exact 0.0004623); at 0.0005 the lease total is $19,121.50 — BUY wins by $73.59; at the exact factor it is $19,047.91 — TIE (a tie within a cent). The buy APR where the net buy cost ties the lease total is 16.17% (exact 16.1670%); at 16.17% the buy payment is $1,057.23 and the net buy cost is $23,810.30 — LEASE wins by $1.60 (the displayed rate is a hair over the exact tie at 16.1670%); at the exact 16.1670% the net buy cost is $23,808.70 — TIE (a tie within a cent). The first lease term where the monthly lease payment is cheaper than the monthly buy payment is 24 months ($813.58 vs $924.94); at 12 months it is $1,469.83 — the lease payment is still dearer than buying. The price where the BUY-wins gap is $5,000 is $39,609.83 (exact $39,609.83); at the displayed price the gap is $4,999.99 (within a cent of $5,000.00), at the exact price it is $5,000.00. The buy term that minimizes the net buy cost is 1 year (net $16,883.04 — BUY wins by $6,925.66); the full 1–7 year scan is $16,883.04, $17,953.63, $19,047.91, $19,852.70, $20,334.05, $20,653.69, $20,880.93 — the net buy cost rises with the buy term because the loan runs longer and the equity shrinks. The residual % where the monthly lease payment equals the monthly buy payment is 17.09% (exact 17.0872%); at 17.09% the lease is $924.92 vs buy $924.94; at the exact 17.0872% it is $924.94 = the buy payment.

Every branch, checked

Residual 60%: Lease $22,241.40 ($551.29/mo), buy net $17,297.91 ($924.94/mo) — BUY wins by $4,943.49. A higher residual cuts the depreciation fee to $388.89 and the lease payment to $551.29 — but the buyer keeps a dearer car too, so buying still wins by $4,943.49.

Money factor 0.0004: Lease $18,926.20 ($459.20/mo), buy net $19,047.91 ($924.94/mo) — LEASE wins by $121.71. This is the flip — a money factor of 0.0004 (about 1% APR) drops the finance fee to $21.70 and the lease payment to $459.20, and LEASE wins by $121.71.

Lease term 24 mo: Lease $21,920.80 ($813.58/mo), buy net $18,643.97 ($924.94/mo) — BUY wins by $3,276.83. A shorter lease lifts the payment to $813.58, but the buyer still owes $10,695.36 on the loan at the end of the window, so the equity is only $8,554.64 — and buying still wins by $3,276.83.

Due at signing $0: Lease $21,808.70 ($594.83/mo), buy net $19,047.91 ($924.94/mo) — BUY wins by $2,760.79. Dropping the $2,000.00 due at signing cuts the lease total to $21,808.70 — but buying still wins by $2,760.79.

Buy APR 9.9%: Lease $23,808.70 ($594.83/mo), buy net $20,547.88 ($966.61/mo) — BUY wins by $3,260.82. A dearer buy loan lifts the buy payment to $966.61 and the net buy cost to $20,547.88 — but buying still wins by $3,260.82.

Price $45,000: Lease $29,926.90 ($764.78/mo), buy net $24,647.21 ($1,233.26/mo) — BUY wins by $5,279.69. A dearer car lifts the lease payment to $764.78 and the lease total to $29,926.90 — but the buyer keeps a $24,750.00 car, so buying still wins by $5,279.69.

Buy term vs net buy cost (1–7 years)

The net buy cost rises with the buy term: a 1-year loan is paid off fast, so the buyer keeps the whole $19,250.00 residual; a 7-year loan still owes money at the end of the window, so the equity shrinks and the net cost climbs to $20,880.93.

What the defaults assume

The model assumes the comparison window is the lease term — the buy side is judged over the same 36 months, not over the buy term. It assumes the buy side’s ending equity is the residual value minus whatever is still owed on the loan, and that the buyer keeps the car at the residual value — a private sale may fetch more or less. It assumes the lease side has no excess-mileage, wear-and-tear, or damage charges, and that no taxes, title, registration, insurance, or dealer fees are included on either side. It assumes the residual is the end-of-term value for the chosen term, so changing the term without changing the residual is a what-if — a 24-month lease would really carry a higher residual than a 36-month one. At residual 100% the lease payment falls to $203.00 and the lease total to $9,703.00 — but the buyer keeps the whole car, so BUY wins by $6,405.09. At money factor 0 the lease payment is $437.50 and LEASE wins by $902.91. With the down payment equal to the price the buy payment is $0.00 and BUY wins by $8,058.70. At a 12-month lease the payment is $1,469.83 and the equity is -$1,429.60 — negative, so the buyer is underwater by $1,429.60 — and BUY wins by $2,504.00. Rounding convention: totals are computed from unrounded values, so rounded parts may differ by a cent from their rounded sum; the gap is the difference of the displayed (rounded) totals; the reverses are nearest-value solutions, and the exact unrounded figures (0.0004623, 16.1670%, 17.0872%) are stated wherever the rounded figures appear.

Output · formula · meaning

Who uses this

• The buyer of a $35,000 car choosing lease or buy: they learn buying wins by $4,760.79 over 36 months — and they check the 0.0004 money-factor branch (LEASE wins by $121.71) to see what flips it.
• The buyer with a $550 monthly budget: they learn the lease payment is $594.83 and the buy payment is $924.94 — and they check the 24-month reverse ($813.58 vs $924.94) to see when the lease payment first undercuts buying.
• The buyer offered a 60% residual: they learn the lease payment falls to $551.29 — and they check the residual-100% edge (BUY wins by $6,405.09) to see why buying still wins.
• The buyer choosing a 1- or a 7-year buy loan: they learn the net buy cost is $16,883.04 at 1 year and $20,880.93 at 7 years — and they check the scan table to see the whole curve.

Accuracy & limitations

The math is first-principles: residual = price × residual %; depreciation = (price − residual) ÷ term; finance = (price + residual) × money factor; buy payment = L·r(1+r)^n / ((1+r)^n − 1); equity = residual − remaining balance; net buy cost = out-of-pocket − equity; the gap is the difference of the displayed totals. The 4-decimal exact is shown where the rounding matters: the money factor for a tie is 0.0004623 (shown as 0.0005); the buy APR for a tie is 16.1670% (shown as 16.17%); the residual % for equal monthly payments is 17.0872% (shown as 17.09%). What the model cannot do is price YOUR deal: it is a what-if — the residual is the end-of-term value for the chosen term, so changing the term without changing the residual is not a real quote; it assumes no excess-mileage, wear-and-tear, or damage charges on the lease side, and no taxes, title, registration, insurance, or dealer fees on either side; and the buyer keeping the car at the residual value is an assumption — a private sale may fetch more or less. For the payment itself, see the car loan calculator; for new vs used, see the new vs used car calculator; for rent vs buy, see the rent vs buy calculator; and for comparing loan terms, see the auto loan term comparison calculator. This is a calculator, not financial advice.