The formula
Leasing and buying are not two prices — they are two totals over the same months. The formula has two sides. The leasing side is simple: the monthly lease payment times the term. The buying side is one subtraction: the laptop price minus the resale value at the end of the term. Whichever total is smaller wins, and the flip term is the first term where the winner changes. That is the whole formula — two totals, one subtraction, one term.
Step 1 — Write down the laptop and the lease
Start with the four numbers the comparison hangs on. In our worked example the laptop costs $1,500.00, the lease is $55.00 a month, the term is 24 months, and the resale value after the term is $500.00. The laptop price is what you would pay if you buy; the lease payment is what you would pay each month if you lease; the term is how long you keep the laptop; and the resale value is what the laptop is worth when the term ends. Write them all down, and keep them fixed — the rest of the steps all use these four numbers, and changing one of them halfway through is how comparisons go wrong.
Step 2 — Work out the lease total
The lease total is the monthly lease payment times the term. At $55.00 a month for 24 months the lease total is $55.00 × 24 = $1,320.00. That is the whole cost of leasing — there is no laptop left at the end, so there is nothing to subtract. If your lease has an upfront fee, add it to the lease total: a $100.00 upfront fee would make the lease total $1,420.00. You do not need to work it out by hand: the lease vs buy laptop calculator does it, and it finds the term where the winner flips.
Step 3 — Work out the buy net
The buy net is the laptop price minus the resale value. At a $1,500.00 laptop price and a $500.00 resale value the buy net is $1,500.00 − $500.00 = $1,000.00. That is the true cost of buying — you pay $1,500.00 up front, but $500.00 comes back when you sell, so the laptop really costs you $1,000.00. The resale value is the hardest number in the whole comparison, because it is a guess about the future: check what your laptop model actually sells for used, and be honest about the condition yours will be in — a cracked screen or a dead battery cuts the price hard.
Step 4 — Compare the totals and find the winner
The lease total is $1,320.00 and the buy net is $1,000.00. The gap is $1,320.00 − $1,000.00 = $320.00 — and because the lease total is higher, buying wins by $320.00. The rule is simple: a positive gap (lease total above buy net) means buying wins, a negative gap means leasing wins, and a gap of exactly $0.00 is a tie. Buying’s effective monthly cost is $1,000.00 ÷ 24 = $41.67 a month — less than the $55.00 lease payment, which is the first sign that the monthly comparison was misleading you.
Step 5 — Find the term where the winner flips
The winner depends on the term, so find the term where it changes. At 18 months the lease total is $990.00 against a buy net of $1,000.00 — leasing wins by $10.00 — and 18 months is the longest term where leasing still wins. At 19 months the lease total is $1,045.00 — buying wins by $45.00 — and 19 months is the shortest term where buying wins. The flip happens between 18 and 19 months. If you will keep the laptop 18 months or fewer, lease; if you will keep it 19 months or more, buy — on these numbers. At 17 months the lease total is $935.00, so leasing wins by $65.00.
Step 6 — Check the effective monthly cost
The last step is the sanity check. Buying’s effective monthly cost is $41.67 a month — the $1,000.00 buy net spread over 24 months — against the $55.00 lease payment. The lease payment looks cheaper than the $1,500.00 purchase price, but the purchase price is not a monthly cost: it is a lump sum, and $500.00 of it comes back. The monthly comparison misleads, and the total-over-the-term comparison is the honest one. If the effective monthly cost is below the lease payment, buying is cheaper; if it is above, leasing is cheaper.
What if the term is 36 months?
A longer term flips the answer further toward buying. At 36 months the lease total is $1,980.00 against a buy net of $1,000.00 — buying wins by $980.00. The buy net does not grow with the term (the resale value is the same $500.00), but the lease total grows by $55.00 every month, so every extra month makes leasing worse. The lesson is that the term matters more than the lease payment: a $55.00 lease is cheap for a year and expensive for three.
What if the term is 12 months?
A shorter term flips the answer the other way. At 12 months the lease total is $660.00 against a buy net of $1,000.00 — leasing wins by $340.00. Short terms favour leasing, because the lease total is small and the buy net is fixed: you have not had time to spread the purchase price over many months. If you upgrade every year, leasing is usually the cheaper way to always have a new laptop — on these numbers, at least.
The lease that ties the two
At $41.67 a month, the lease ties buying almost exactly — the lease total is $1,000.08, eight cents over the $1,000.00 buy net, so buying wins by eight cents. At $41.68 the lease total is $1,000.32 and buying wins by $0.32. So the question “is $55.00 a month a good lease?” has a number attached: $41.67 is the line. Below it, lease; above it, buy — at 24 months, on a $1,500.00 laptop with a $500.00 resale.
The resale that ties the two
At a $180.00 resale, leasing and buying tie exactly — the buy net is $1,320.00, the same as the lease total. At a $179.00 resale the buy net is $1,321.00 and leasing wins by $1.00; at a $181.00 resale the buy net is $1,319.00 and buying wins by $1.00. So the resale value is the number to watch: if your laptop will still be worth more than $180.00 after 24 months, buy it; if it will be worth less, lease it.
The monthly-cost warning
The $55.00 lease payment looks cheaper than the $1,500.00 purchase price — $55.00 a month against $1,500.00 all at once. If you stop there, leasing looks like a bargain. But buying’s effective cost is $41.67 a month — less than the lease payment — because $500.00 of the purchase price comes back when you sell. The monthly comparison misleads: the honest comparison is the total over the term, with the resale value subtracted. That is why the calculator compares totals over a term instead of months — and why the flip term, not the monthly payment, is the answer to “lease or buy?”