Lease vs. buy car calculator
Work out a car lease payment from the price, residual value and money factor, then see what leasing and buying with a loan cost over the same months.
Lease and loan details
Copy the figures from the lease quote and the loan offer.
Results
Compare a lease with a loan
The lease payment and the cost of each option over the lease term appear here.
- Enter the price, down payment and residual value.
- Add the lease term and money factor (or APR).
- Add the loan rate and term, then press Compare.
These numbers don't produce a result
Check that the residual value is lower than the price minus the down payment, and that both terms are whole months.
Monthly lease payment Example
—
Press Compare to update
Net cost over the lease term
Lease
—
Down payment, payments and fees
Buy
—
Paid and still owed, minus the car's value
| Lease | Buy | |
|---|---|---|
| Down payment | ||
| Monthly payment | ||
| Payments made | ||
| Fees outside the payment | — | |
| Loan balance still owed | — | |
| Minus the car's value | — | |
| Net cost |
| Step | Amount |
|---|---|
| Vehicle price | |
| + Acquisition fee added to the lease | |
| − Down payment | |
| = Adjusted cap cost | |
| Residual value | |
| Depreciation fee | |
| Finance fee | |
| = Base payment | |
| + Sales tax | |
| Monthly payment |
Not included: maintenance and repairs, insurance, mileage overage and wear-and-tear charges at lease end, registration, and what the down payment could earn elsewhere. The car's future value is an estimate, not a known figure.
How this is calculated
Lease payment (standard US method):
depreciation fee = (adjusted cap cost − residual) ÷ term finance fee = (adjusted cap cost + residual) × money factor payment = (depreciation fee + finance fee) × (1 + tax rate) The adjusted cap cost is the price, plus any fee added to the lease, minus the down payment. APR equivalent = money factor × 2400.
Buying: sales tax on the price is financed with the loan. Over the lease term, the net cost is the down payment plus the loan payments made, plus the balance still owed, minus the car's estimated value.
Estimates for comparison only. The lease contract and the loan agreement set the real figures; some states tax leases differently (for example, on the down payment too).
How a car lease payment is calculated
A lease charges you for the part of the car's value you use up, plus a finance charge for the money tied up in it. The standard US method has three steps:
depreciation fee = (adjusted cap cost − residual value) ÷ term finance fee = (adjusted cap cost + residual value) × money factor monthly payment = (depreciation fee + finance fee) × (1 + sales tax rate) The adjusted capitalized cost is the price you agree on, plus any fees rolled into the lease, minus the down payment (the cap cost reduction). Some states tax a lease differently, for example by also taxing the down payment; the lease contract shows how yours is taxed.
Money factor and residual value
Money factor
The money factor is the lease's finance rate written as a small decimal. Multiplying it by 2400 gives an APR equivalent you can set beside a loan rate: a money factor of 0.0025 works out to 6 %. The factor 2400 comes from 12 months × 100 (to get a percentage) × 2, because the finance fee is charged on the cap cost plus the residual — roughly twice the average amount outstanding.
If the dealer gave you a payment but not the money factor, the lease deal checker works it out from the quote.
Residual value
The residual is the leasing company's projection of the car's value at the end of the term. It is set by the lessor, not negotiated like the price, and is usually quoted as a percentage of MSRP. If the price you agreed differs from MSRP, enter the residual as a dollar amount in the calculator so the percentage is not applied to the wrong base.
Worked example
These are the example inputs loaded in the calculator, chosen for illustration — not typical market rates or residuals: a $35,000.00 car, $3,000.00 down, a 58 % residual, 36 months, a money factor of 0.0025 and 6 % sales tax. Fees are left at zero.
| Step | Calculation | Result |
|---|---|---|
| Adjusted cap cost | $35,000.00 − $3,000.00 | $32,000.00 |
| Residual value | $35,000.00 × 58 % | $20,300.00 |
| Depreciation fee | ($32,000.00 − $20,300.00) ÷ 36 | $325.00 |
| Finance fee | ($32,000.00 + $20,300.00) × 0.0025 | $130.75 |
| Base payment | $325.00 + $130.75 | $455.75 |
| Monthly payment | $455.75 × 1.06 | $483.10 |
Leasing for 36 months costs $3,000.00 down + 36 × $483.10 = $20,391.42, and you hand the car back.
Buying with a 60-month loan at 6 %: the 6 % sales tax ($2,100.00) is financed with the price, so the loan is $34,100.00 and the payment is $659.25. After 36 payments ($23,732.95) you still owe $14,874.54. If the car is then worth the residual, $20,300.00, the net cost is $3,000.00 + $23,732.95 + $14,874.54 − $20,300.00 = $21,307.48.
With these example numbers, leasing costs $916.06 less over 36 months. If the car were worth $18,270.00 instead, leasing costs $2,946.06 less — the comparison moves with the car's future value, which is an estimate.
What the comparison leaves out
- Maintenance and repairs. A newer leased car may be under warranty for the whole term; an owned car keeps going after it.
- Mileage overage charges. Leases include a mileage allowance and charge per mile above it when you return the car.
- Wear-and-tear charges. Damage beyond normal use can be billed at lease end.
- Opportunity cost. Money paid up front or in higher payments could have earned interest elsewhere.
- Insurance, registration and other fees that may differ between leasing and owning.
- What happens after the lease term. The buy side stops at the same month; owning the car after the loan is paid is not counted.
Frequently asked questions
How is a car lease payment calculated?
A lease payment has two parts. The depreciation fee is the adjusted capitalized cost minus the residual value, divided by the number of months. The finance fee is the adjusted capitalized cost plus the residual value, multiplied by the money factor. Their sum is the base payment, and sales tax is usually added on top. For example, $32,000.00 adjusted cap cost, $20,300.00 residual, 36 months and a 0.0025 money factor give $325.00 + $130.75 = $455.75 before tax.
How do I convert a money factor to an APR?
Multiply the money factor by 2400. A money factor of 0.0025 is a 6 % APR equivalent. To go the other way, divide the APR by 2400. The result is a convention used to compare a lease with a loan, not a rate stated in the lease contract.
What is a residual value?
The residual value is what the leasing company projects the car will be worth at the end of the lease. It is set by the lessor, is usually quoted as a percentage of MSRP, and is written in the lease contract. You pay for the difference between the adjusted cap cost and the residual, so a higher residual means a lower depreciation fee.
Is it cheaper to lease or buy a car?
It depends on the numbers in each offer and on what the car is worth when the lease ends. In the example on this page, leasing costs $916.06 less over 36 months when the car keeps the residual value of $20,300.00; if it is worth $18,270.00 instead, leasing costs $2,946.06 less. Enter your own figures to see the result for your case.
What does this lease vs. buy comparison leave out?
It does not include maintenance, repairs, insurance, registration, mileage overage charges, excess wear-and-tear charges at lease end, or what the down payment could earn if you kept it. It also assumes the car's future value, which nobody knows in advance.