Car Lease vs Buy Calculator

Leasing typically has lower monthly payments but higher total cost over the long term because you never build equity in the vehicle. Buying costs more upfront and in the short term but you own the asset after the loan is paid. Over a 10-year period, buying and keeping a vehicle is almost always cheaper than repeatedly leasing. The CFPB consumer guidance on auto leasing explains these trade-offs.

Residual value is the estimated value of the vehicle at the end of the lease term, set by the leasing company. It is expressed as a percentage of MSRP. A higher residual value means lower monthly payments because you are financing less of the vehicle's depreciation. Leases on vehicles with strong residual values (many trucks and SUVs) tend to have more attractive monthly payments.

The money factor is the financing charge in a lease, similar to an interest rate. To convert money factor to approximate APR: APR = Money factor x 2,400. For example, a money factor of 0.00200 equals approximately 4.80% APR. The money factor is not always disclosed proactively; under the federal Consumer Leasing Act (15 U.S.C. 1667), lessors must disclose the lease charge in dollars but not as an APR.

For business use, lease payments may be deductible as a business expense, subject to luxury auto inclusion amount rules (IRS Publication 463, Appendix A). When buying, the vehicle is depreciated using MACRS or Section 179 expensing. Whether leasing or buying is more tax-efficient depends on your tax bracket, usage percentage, and the vehicle's cost. Consult a tax professional for your specific situation.

Lease excess mileage charges: typically $0.15 to $0.30 per mile over the contracted annual limit (usually 10,000 to 15,000 miles). Wear and tear charges for damage beyond normal use. Disposition fee at lease end (typically $300 to $500). Acquisition fee at lease start (typically $600 to $1,000). Gap insurance is advisable; some leases include it. Early termination penalties can be very large.