Lease vs Buy Calculator

A lease vs buy calculator compares the true total cost of leasing a vehicle versus financing a purchase over the same holding period. The core tradeoff is straightforward: a lease usually produces a lower monthly payment because you pay only for the vehicle's depreciation, while a purchase builds equity that you recoup when you sell or trade in. The calculator below accounts for down payments, interest rates, money factor, sales tax, loan balance, and resale value to show which option costs less in total and at what month buying breaks even.

Compare the total cost of leasing versus buying over the same period, including resale equity.

Shared Inputs

Vehicle Price$35,000.00

$5,000.00$100,000.00

Sales Tax Rate7%

0%12%

Comparison Period

36 months

12 mo84 mo

Lease Terms

Lease Down Payment$2,000.00

$0$10,500.00

Residual Value

55% ($19,250.00)

10%85%

Money Factor

Equivalent APR: 3%

Lease Term36 months

12 mo60 mo

Purchase / Finance Terms

Purchase Down Payment$3,500.00

$0$17,500.00

Loan APR6.5%

0%15%

Loan Term60 months

12 mo84 mo

Est. Resale / Trade-In Value

$21,000.00

$0$35,000.00

Over 36 months, leasing is cheaper

by $2,097.49

Buying builds equity; leasing does not.

Monthly Lease

$478.56

$19,228.16 total

Monthly Loan

$664.27

$27,413.72 total paid

Lease Cost Breakdown

Down payment$2,000.00

36 monthly payments$17,228.16

of which depreciation$13,749.84

of which finance charge$2,351.16

of which tax$1,127.16

Total Lease Cost$19,228.16

Purchase Cost Breakdown

Down payment$3,500.00

Sales tax (7% of $35,000.00)$2,450.00

36 monthly payments$23,913.72

Remaining loan balance- $14,911.93

Resale value- $21,000.00

Net Cost of Buying$21,325.65

Equity retained: $6,088.07

Buying does not break even

Over the 36-month comparison period, leasing remains cheaper. Buying may still break even if you hold the vehicle well beyond this period and resale value holds up.

This is an estimate for informational purposes only. Actual costs vary by lender, credit profile, negotiated price, and local tax treatment. Always review your lease or loan agreement before signing.

Lease vs Buy Car Calculator

The lease vs buy decision comes down to total cost of ownership over the period you plan to keep the vehicle. Leasing means lower monthly payments but zero equity at the end. Buying means higher payments but you own the car and can sell it. The net cost of buying is the total of all payments minus the resale value you receive when you sell. The net cost of leasing is simply the sum of all lease payments, because you return the vehicle with nothing to show for it.

Worked example (computed by engine): A $35,000.00 vehicle at 7% sales tax, compared over 36 months. The lease uses $2,000.00 down, a 55% residual value, a money factor of 0.00125 (3% APR), and a 36-month term. The lease payment is $478.56/month, for a total lease cost of $19,228.16. The purchase uses $3,500.00 down, a 6.5% loan APR, and a 60-month term. The loan payment is $664.27/month, total payments over 36 months are $27,413.72, the remaining loan balance is $14,911.93, and the estimated resale value of $21,000.00 leaves equity of $6,088.07. Net cost of buying is $21,325.65, which is $2,097.49 more than leasing.

Is It Better to Lease or Buy a Car Calculator

Whether leasing or buying is the better financial choice depends on three variables: how long you keep the car, how well the car holds its value, and what you pay in interest or money factor. If you replace your car every three years, leasing can be competitive because the lease payment covers only the steepest part of the depreciation curve. If you keep a car five years or longer, buying almost always wins because the depreciation slows while the loan is paid off, and you accumulate meaningful resale equity.

Longer holding period example: Using the same $35,000.00 vehicle with identical lease and loan terms but extending the comparison to 60 months, the lease requires two consecutive 36-month terms (with a second down payment of $2,000.00). The total lease cost rises to $32,713.60. The purchase side: 60 months of loan payments of $664.27/month plus $3,500.00 down equals $43,356.20. With a 60-month resale estimate of $16,000.00 and the loan fully paid off, the net cost of buying drops to $27,356.20. Buying saves $5,357.40 over the 60-month period, a larger gap than at 36 months, confirming that longer holding periods favor purchasing.

Lease vs Finance Calculator with Tax

Sales tax treatment differs between leases and purchases and can shift the comparison by a meaningful amount. On a lease, most states apply tax to each monthly payment, so you are taxed only on the depreciation portion rather than the full vehicle price. On a purchase, tax is typically applied to the selling price up front and either paid in cash or rolled into the loan, increasing the financed amount. The net effect is that leasing often results in less total tax paid over the same period.

Tax comparison (computed by engine): The base $35,000.00 vehicle over 36 months, same lease and loan terms. In a zero-tax state (0% sales tax), the lease total is $18,101.00 and the net buy cost is $18,523.69, with buying cheaper by $422.69. In a 7% tax state, the lease total rises to $19,228.16 and the net buy cost to $21,325.65, with buying cheaper by $2,097.49. In a 10% tax state, the lease total is $19,711.28 and the net buy cost is $22,526.65, with buying cheaper by $2,815.37. The tax difference between 0% and 10% is $1,610.28 on the lease side. Note that some states (such as Texas) tax leases on the full selling price, which would narrow this gap.

Lease vs Buy Calculator Electric Car

Electric vehicles add a layer of complexity to the lease versus buy calculation because of the federal EV tax credit (up to $7,500.00 for qualifying vehicles). On a lease, the lessor (the finance company) claims the credit and typically passes it through as a capitalized cost reduction, which lowers the monthly payment for any lessee regardless of their tax liability. On a purchase, you must have enough federal tax liability in the year you buy the car to claim the full credit. If your liability is too low, you may not benefit from the full amount.

EV example (computed by engine): A $45,000.00 electric vehicle with the full $7,500.00 credit applied. Lease side: $7,500.00 cap cost reduction (the credit), 60% residual (EVs with strong demand hold value well), money factor 0.00100 (2.4% APR), 36-month term, 7% tax. The monthly lease payment is $381.10 for a total lease cost of $21,219.60. Purchase side: the $7,500.00 credit applied as a down payment equivalent,$37,500.00 financed at 5.9% for 60 months. Monthly payment is $783.99. Over 36 months, total payments are $35,723.64, remaining balance is $17,707.05, and with an estimated $27,000.00 resale value the equity is $9,292.95. Net cost of buying is $26,430.69. Buying costs $5,211.09 more than leasing in this scenario. The higher residual value on the EV strengthens the equity case for buying if you plan to hold the car beyond the lease term.

Lease vs Buy Break Even Calculator

The break-even point between leasing and buying is the month at which the cumulative net cost of buying drops below the cumulative cost of leasing. Before break-even, leasing is cheaper month by month. After break-even, the equity you have accumulated by owning the vehicle outweighs the higher loan payments. The calculator estimates this month by interpolating the resale value over time and comparing cumulative costs at each month.

Short-hold example: Comparing the same $35,000.00 vehicle over just 24 months, with a higher estimated resale of $24,000.00 (less time for depreciation). The lease total is $13,485.44. The buy total payments are $19,442.48, remaining balance is $21,673.49, equity is $2,326.51, and net cost of buying is $17,115.97. Leasing is still cheaper by $3,630.53 at 24 months. The break-even would come later. In most scenarios with typical residuals and interest rates, the break-even falls between months 24 and 48. If your planned holding period is shorter than the break-even month, leasing is the lower-cost option. If it is longer, buying wins.

Frequently Asked Questions

Is it always cheaper to lease than to buy?

No. A lease typically has a lower monthly payment because you are paying for depreciation rather than the full vehicle price. However, at the end of the lease you do not own anything, while a buyer retains equity in the car. Over a longer holding period, the equity advantage of buying usually makes it the lower total-cost option. The calculator above compares both sides over the same period and accounts for resale value so you can see which is actually cheaper for your situation.

How does the resale value affect the lease vs buy decision?

Resale value is the single biggest factor that swings the decision toward buying. When you buy a car, the difference between what you paid and what the car is worth at the end is the real cost of ownership. If the vehicle retains a large portion of its value (for example, certain trucks, SUVs, or vehicles with strong brand demand), buying can be significantly cheaper than leasing even though the monthly loan payment is higher. The calculator lets you enter an estimated resale or trade-in value to see exactly how much equity you build.

Does sales tax work differently for leases versus purchases?

In most states, lease tax is applied to each monthly payment, while purchase tax is applied to the full selling price up front. This means the lease tax is spread over the term and slightly reduced because you are only taxed on the depreciation portion. However, some states (such as Texas) require lease tax on the full selling price. The calculator applies tax to the monthly lease payment, which is the most common approach. If your state uses a different method, adjust your inputs accordingly.

Is leasing or buying better for an electric vehicle?

Leasing can be attractive for electric vehicles because the federal EV tax credit of up to $7,500 can often be applied as a capitalized cost reduction on a lease, lowering the monthly payment even if your tax liability is too low to claim the credit on a purchase. On the buy side, the same credit is claimed on your tax return, which may not be fully usable. However, EV depreciation can be steep, and a buyer who qualifies for the full credit and holds the car long enough to benefit from lower fuel and maintenance costs may still come out ahead. The calculator lets you model both sides with your actual numbers.

What is the break-even point between leasing and buying?

The break-even point is the month at which the cumulative net cost of buying (total payments minus equity) drops below the cumulative cost of leasing. Before this point, leasing is typically cheaper on a month-to-month basis because of the lower payment. After the break-even, the equity you have built by buying outweighs the higher loan payments. The calculator estimates this month automatically. In many cases the break-even falls within the first 24 to 48 months, which is why the decision is often close for a typical three-year comparison.

Related Calculators

To compute the lease payment alone, use the Auto Lease Calculator. For the purchase side, the Auto Loan Calculator provides a detailed amortization schedule. If you have not yet decided on a vehicle price, the Car Affordability Calculator helps you find the maximum price that fits your budget. Browse all auto tools on the Auto Calculators hub.

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