How this calculator works
The lease payment follows the usual structure the FTC describes: expected depreciation plus a rent charge, then tax. Depreciation is the capitalized cost (price plus acquisition fee, less the down payment) minus the residual value, spread over the term; the rent charge is the capitalized cost plus the residual, times the money factor. The lease is repeated with the same terms until the years compared are covered, with a down payment at the start of each lease, a disposition fee at the end of each, and any mileage overage.
The purchase is financed at the APR over the loan term, with sales tax on the price. The net cost of buying in any year is what has been paid so far, plus the loan balance still owed, minus what the car would sell for then; extra maintenance is added after the third year, when a lease would typically still be under warranty. The crossover is the first year in which buying’s net cost is at or below leasing’s.
Worked example
With the defaults, the capitalized cost is $36,000 + $695 − $2,000 = $34,695 and the residual is 58% of $38,000 = $22,040. Depreciation is $351.53 a month and the rent charge $127.65, so the payment is $479.18, or $507.93 with 6% tax. Two 36-month leases cover 6 years and cost $41,361 including down payments, fees and taxes.
Buying finances $36,000 plus 6% tax, less $2,000 down: $36,160 at 6.5% over 60 months is $707.51 a month. After 6 years, with $1,800 of extra maintenance and the car worth 42% of its price, buying has cost a net $31,131, $10,230 less than leasing. Buying becomes the cheaper path in year 4, when the second lease begins.
How to read the result
The crossover year is the point at which the equity built by buying outweighs leasing’s lower payments. Over short periods leasing can cost less, because a new car loses value fastest in its first years and the lease charges only for that use: over 3 years, the defaults have leasing $1,072 cheaper. The longer the car is kept, the more buying gains, because loan payments stop while lease payments continue.
The years compared move the result most: over 9 years, buying costs $37,251 against $62,042 for three leases. Mileage matters for the lease: driving 15,000 miles a year on a 12,000-mile allowance adds $4,500 over two leases at $0.25 a mile. The residual value and money factor set the lease payment; the APR and resale value set the cost of buying.
Assumptions and sources
- Federal Trade Commission, Financing or leasing a car — what a lease payment covers (depreciation, rent charge, taxes and fees), mileage limits and excess-mileage fees, early termination charges
- Consumer Financial Protection Bureau, What is included in the monthly auto loan payment? — principal and interest on an auto loan
Checked October 2026. Money factor × 2,400 is an approximation: the rent charge equals the average of the capitalized cost and residual (their sum divided by two) times the monthly rate, so the money factor is the annual rate divided by 24. Sales-tax treatment of leases differs by state. The depreciation curve used for intermediate years is an illustrative default.
Common mistakes
- Comparing a 36-month lease payment with a 60-month loan payment. The payments buy different things over different periods; only the net cost over the same number of years compares them.
- Leaving out the fees on the second lease. Each new lease brings another down payment and, at the end, another disposition fee.
- Counting the lower lease payment as savings. The buyer’s higher payments build equity that is recovered when the car is sold.
- Underestimating mileage. Miles above the allowance are charged at return; the FTC notes that most standard leases allow 15,000 miles a year or less.
- Comparing a lease priced from MSRP with a negotiated purchase. The capitalized cost can be negotiated just like a purchase price.
Frequently Asked Questions
Is leasing ever cheaper than buying?
Over short periods it can be. With these defaults, leasing for 3 years costs $1,072 less than buying and selling after 3 years, because the lease charges only for the car’s steepest years of depreciation. Over 6 or 9 years, buying costs less.
What is a money factor?
It is the lease’s finance rate written as a small decimal. Multiplying it by 2,400 gives an approximate APR: the default 0.00225 is about 5.4%.
What happens if the lease mileage is exceeded?
The lease charges a fee for each mile over the allowance when the car is returned. At $0.25 a mile, 3,000 extra miles a year on a 36-month lease adds $2,250.
Does a down payment on a lease save money?
It lowers the payment by reducing the capitalized cost and the rent charge on it, but it is money paid upfront that is not returned if the car is totaled or the lease ends early.