How the comparison works
Leasing is pure cost: drive-off + monthly payments + disposition fee at lease end. You walk away with nothing. Buying is cash outlay (down payment + monthly payments) minus the equity you have in the car at the same point in time — that's the estimated resale value less the remaining loan balance.
The calculator runs both numbers for the same compare period — typically the length of the lease — and tells you which option costs less, and by how much. For parity, taxes and fees are omitted (they apply under both options, just differently); enter the lease and buy figures as quoted to you.
The formula
Lease total cost = drive-off + (lease monthly × compare months) + disposition fee. Buy net cost = (down + buy monthly × compare months) − (estimated value at end − loan balance after compare months). Loan balance comes from the standard amortization schedule. See the methodology for full details.
Example calculation
On a $38,000 car over 36 months, with $2,500 drive-off and a $450 lease payment vs $4,000 down at 6.9% APR over 60 months and a $22,000 estimated value at the end: leasing costs about $19,100 all-in. Buying costs about $28,200 in cash but leaves you with roughly $7,000 of equity (a $22,000 car with about $15,000 still owed), for a net cost of about $21,200. Leasing is the cheaper option here by about $2,100 over three years — but you own nothing at the end.
When leasing vs buying makes sense
Leasing tends to win when: you keep cars for 3 years or less, you stay within the mileage cap, and you value driving something newer with the latest tech and safety features. Buying tends to win when: you drive a lot, you keep cars for 5+ years, or the model holds value unusually well.
If you're at the end of a current lease and the car is worth more than the residual, the math may favor a buyout — see the lease buyout calculator.
Common mistakes to avoid
- Comparing only monthly payments — leases almost always look cheaper this way, even when they aren't.
- Ignoring resale equity on the buy side — it can be a few thousand dollars and flips the answer.
- Mismatching the compare period — compare both options over the same number of months.
- Forgetting mileage caps (typically 10–15k/yr) — over-mileage fees can add $1,500–$3,000 at turn-in.
- Treating the disposition fee as optional — you owe it unless you buy the car out or re-lease.
Comparing on a fair basis
Most lease-vs-buy comparisons fail because they pit a lease's monthly payment against a finance payment and stop there. That ignores the central difference: at the end of a lease you have nothing; at the end of a finance period (or partway through it) you own an asset worth real money. A fair comparison runs both options over the same period and credits the buyer's equity at the end. That's how this calculator works.
Where leasing tends to win
Leasing usually wins when the comparison period is short (1–3 years), the buyer keeps mileage inside the cap, the vehicle is one that loses value quickly, and the buyer values driving something newer with the latest tech. Leasing also concentrates the cost into the period of fastest depreciation, leaving the slower-depreciating back end to someone else.
Where buying tends to win
Buying tends to win when the comparison period extends past 4–5 years, the vehicle holds value unusually well, the buyer drives more than typical lease mileage caps allow, or the buyer simply prefers to own things outright. Over 7–10 years, ownership almost always wins decisively because you spend several years paying nothing but insurance and maintenance.
Frequently asked questions
Is it cheaper to lease or buy a car?+
It depends on the specific deal, the car's resale value, and how long you keep it. Over a 3-year period, leasing often wins on cash cost but you own nothing; over 5–10 years, buying almost always wins because you keep the equity. Run the calculator with your actual numbers.
How do you compare leasing vs buying fairly?+
Compare both options over the same period and count equity on the buy side. Lease cost is pure spending; buy cost is cash out minus the resale value of the car (less any loan balance) at the end of the period. Comparing only monthly payments is misleading.
Does buying always win long-term?+
Usually, yes — if you keep the car well past the loan payoff, you drive several years payment-free with only insurance and maintenance, which pulls the long-run cost well below leasing. The longer your ownership horizon, the more buying wins.
What is equity when you buy a car?+
Equity is the car's current market value minus the remaining loan balance. If your car is worth $22,000 and you still owe $13,000, you have $9,000 of equity — money you can recover by selling or trading the car. Equity is the reason buying isn't pure spending.
Should I lease or buy if I drive a lot?+
Buy. Standard leases cap mileage at 10,000–15,000 per year and charge $0.15–$0.30 per mile over the cap. If you drive 20,000+ miles a year, the overage fees usually wipe out any savings from leasing — and you'd be returning a high-mileage car at the end anyway.
Reviewed for accuracy
Priya Shankar, CFP® — Reviewing Editor
Priya is a CERTIFIED FINANCIAL PLANNER™ who reviews AutoLoanWise content for technical accuracy. She works with consumer borrowers on debt strategy, credit, and large-purchase decisions.
. See our methodology for the formulas behind every result.