Loan vs Lease Calculator

Loan vs Lease Calculator

Whether you buy or lease a vehicle shapes your monthly cash flow, your equity position, and how much flexibility you have when your needs change. The monthly payment difference alone does not tell the whole story — buying builds an asset you eventually own outright, while leasing delivers a lower payment today at the cost of starting over every few years. This calculator puts both options on equal footing by comparing the true net cost over the lease period, factoring in your down payment, loan rate, and the vehicle’s residual value.

How Buy vs Lease Costs Are Compared

For buying, the calculator computes your monthly loan payment using the amortization formula:

M = (P - D)[r(1+r)^n] / [(1+r)^n - 1]

where P is the vehicle price, D is the down payment, r is the monthly interest rate, and n is the loan term in months.

To compare fairly over the same time window as the lease:

Net Buy Cost = (Monthly Loan Payment x Lease Months + Down Payment) - Residual Value

For leasing:

Total Lease Cost = Lease Payment x Lease Months + Down Payment

The residual value is subtracted from the buy scenario because you still own an asset worth that amount at lease end. The option with the lower net cost wins.

Worked Examples

Scenario 1 — Compact car, typical buyer

A $30,000 Honda CR-V with a $2,000 down payment, 7.0% APR over 60 months produces a $554/month loan payment. Over 36 months that totals $21,944 paid plus the $2,000 down = $23,944. The residual value at 36 months is roughly 55% = $16,500. Net buy cost: $7,444. The same vehicle leased at $369/month for 36 months with the same $2,000 down totals $15,284. Lease wins by $7,840 — but you own nothing at the end.

Scenario 2 — Pickup truck, high residual

A $52,000 Ford F-150 with $3,000 down at 7.5% over 60 months runs $977/month. Over 36 months: $38,172 paid + $3,000 down = $41,172. F-150 holds value well — residual at 36 months is ~62% = $32,240. Net buy cost: $8,932. Lease at $599/month for 36 months plus $3,000 down = $24,564. Lease wins again at this holding period. But if you keep the truck to 72 months, buying’s total interest cost amortizes over a vehicle you still own.

Scenario 3 — Luxury sedan, high mileage driver

A $65,000 BMW 5 Series with $5,000 down at 6.9% over 60 months costs $1,235/month. Over 36 months: $44,460 + $5,000 = $49,460. Residual at 36 months: ~48% = $31,200. Net buy cost: $18,260. Lease at $899/month for 36 months + $5,000 = $37,364. This buyer drives 22,000 miles/year. Lease overage at $0.25/mile on 7,000 extra miles/year = $5,250 over the term. Adjusted lease cost: $42,614. Buying wins by $24,354 for the high-mileage driver.

Buy vs Lease Quick Reference

When to Use This Calculator

• You are deciding between a 36-month lease and a 60-month loan on the same vehicle
• You drive under 12,000 miles per year and want to verify leasing makes financial sense
• A manufacturer is offering a particularly low lease money factor (equivalent to low APR) and you want to quantify the benefit
• You use the vehicle for business and need to compare deductibility across both options
• You are coming off a lease and deciding whether to buy out the vehicle or start a new lease

Common Mistakes

1. Comparing monthly payment only — a lease payment of $399 versus a loan payment of $627 looks like a $228/month win, but you own nothing at lease end; always compare net cost over the lease period
2. Ignoring mileage overages before signing — at $0.25/mile, driving just 3,000 miles over a 36-month cap costs $750; high-mileage drivers should negotiate a higher cap upfront or choose to buy
3. Putting too much down on a lease — a large cap cost reduction lowers payments but is lost if the vehicle is totaled in month one; keep lease down payments small and invest the difference
4. Not factoring in the buyout option — if you fall in love with a leased vehicle and want to buy it at lease end, the buyout price is set at contract signing; compare that future purchase price against market value before committing

Current Context for 2026

Lease money factors (the lease equivalent of an APR) rose significantly in 2023-2024 alongside interest rates, making many leases less attractive than in the 2019-2021 era when money factors on popular models were near zero. As of early 2026, money factors on mainstream vehicles are equivalent to roughly 7-9% APR, narrowing the monthly payment advantage of leasing. Manufacturers periodically subsidize leases with subvented money factors — Toyota, Honda, and GM have all run promotional lease rates at various points in 2025 that brought effective APRs below 5%. Check manufacturer incentives pages monthly if leasing is your preference. EV leases remain attractive in 2026 because the $7,500 federal tax credit passes through to the leasing company and is often factored into the cap cost reduction, effectively lowering EV lease payments in ways that don’t exist for outright purchases of used EVs.

Tips

• If you plan to keep the vehicle more than 4 years, buying almost always costs less in the long run — the loan eventually ends and the car is yours
• Negotiate the vehicle selling price the same way whether buying or leasing; both options start from the capitalized cost
• Compare net cost (total paid minus residual value for buying) rather than monthly payments for any honest comparison
• For business use, consult a tax professional — lease payments may be fully deductible while purchased vehicles are depreciated over time
• If choosing to lease, put the monthly savings versus a loan payment into a separate account; at lease end you will have a down payment for the next vehicle
• Lease deals are most favorable in September-October when dealers clear outgoing model year inventory

Related Calculations

• Auto Loan Calculator — model any loan amount, rate, and term in detail
• Auto Lease Calculator — calculate lease payments from money factor and residual
• Auto Loan Comparison — compare two loan offers side by side
• Car Affordability Calculator — determine the right vehicle price for your income
• Fuel Cost Calculator — factor in fuel costs for your driving habits