How this calculator works
Leasing and buying the same car produce very different cash-flow patterns: a lease has a lower, level payment but ends with nothing owned, while a loan builds equity that has real value if you sell or trade in the car later. This calculator puts both paths on equal footing over a chosen ownership horizon — the same down payment or drive-off amount, the same car price — and nets out the equity you would have if you bought, so the two total costs are directly comparable.
The comparison depends heavily on two numbers you supply: the lease's money factor and residual value, and the car's expected resale value if you buy. Small changes in expected resale value can flip the verdict, since it is subtracted directly from the total cash you would have paid to buy the car.
The formulas
Lease payment: (adjusted cap cost − residual value) ÷ term + (adjusted cap cost + residual value) × money factorTotal leasing cost = drive-off(s) + monthly lease payment × months in the horizonLoan payment: M = P × i ÷ (1 − (1 + i)^−n)Net cost of buying = down payment + payments made − (expected resale value − remaining loan balance)If your ownership horizon is longer than one lease term, this calculator assumes you sign an identical new lease — and pay the drive-off amount again — for each additional term. If the horizon is shorter than the loan term, the remaining loan balance is subtracted from the resale value to get your actual equity.
Worked example: $35,000 car, $2,000 down, 3-year horizon
- Leasing: 36-month lease, 55% residual, 0.00125 money factor → $447.26/month; over 3 years that's $2,000 + (447.26 × 36) ≈ $18,101 total.
- Buying: $33,000 financed at 6% over 60 months → $637.98/month; after 36 payments the loan balance is about $14,395.
- Total cash paid to buy over 3 years = 2,000 + (637.98 × 36) ≈ $24,967.
- Subtract equity (expected resale $22,000 minus the $14,395 owed) ≈ $7,605: net cost of buying ≈ 24,967 − 7,605 = $17,362, about $739 less than leasing.
Frequently asked questions
Why does the calculator ask for the same down payment for both leasing and buying?
Using one shared amount as both the lease drive-off and the loan down payment keeps the comparison apples-to-apples — otherwise a difference in upfront cash could make one option look artificially cheaper.
What if I plan to keep the car longer than the lease term?
This calculator assumes you would sign a new, similar lease (and pay the drive-off again) for each additional lease term within your horizon. In practice, terms on a renewed lease may differ, so treat a multi-lease-cycle result as a rough estimate.
How sensitive is the result to the expected resale value?
Very. Resale value is subtracted directly from your total cash paid to buy, so a more optimistic or pessimistic estimate can swing the net cost of buying by thousands of dollars and flip the verdict. Check a low, middle and high resale estimate if you are unsure.
Does leasing ever build any equity?
No — at the end of a standard lease you return the car and owe nothing further (barring wear-and-tear or mileage charges), so this calculator treats leasing's ending equity as zero. Buying's equity is the resale value minus whatever loan balance remains.
Does this include taxes, insurance or maintenance differences?
No — it compares only the financing side: lease payments and drive-offs versus loan payments and resulting equity. Insurance requirements can differ slightly between a lease and a loan, and maintenance costs are the same car either way; see the car cost of ownership calculator for a fuller running-cost picture.