How it works
A lease-versus-buy calculator built from contract math shows which path truly costs less per year of driving. A lease finances only the vehicle's depreciation during the term - the drop from capitalized cost to residual value - plus a rent charge computed from the money factor on the average of those two figures. Buying finances the whole price, but ends with an asset you can sell. Because the two paths run different horizons, comparing monthly payments flatters the lease every time; the honest yardstick is total cost divided by years driven. This calculator reconstructs the lease payment from the quote's pieces - price, cap-cost reduction, residual percentage, money factor and fees - so you can check whether the dealer's number is fair, then sets it against a loan whose cost nets out the resale equity at payoff. On typical inputs buying wins on cost per year, because ownership ends with something worth selling; leasing wins mainly for drivers who always want a late-model car under warranty, stay well under the mileage allowance, and value predictability over equity. Multiply the money factor by 2,400 before signing anything: it exposes the lease's true interest rate against the loan's APR.
Formula
Lease payment = depreciation + (cap cost + residual) x money factor | Buy net cost = down + payments - resale
Tips
- Compare cost per year, never the monthly payment - low payments are what leases are sold on.
- Multiply the money factor by 2,400 to reveal the lease APR and hold it against your loan offer.
- The residual percentage drives everything - high-residual models lease cheaply and depreciate slowly.
- Budget mileage honestly; excess bills run 15-25 cents a mile at return.
- Never roll negative equity or fees into a new lease - you pay depreciation on dead debt.
Frequently asked questions
- Is it cheaper to lease or buy a car?
- Over any horizon where you keep the car past the loan, buying wins - the lease pays depreciation forever and builds no equity. Leasing can win per-year for people who always drive a new car under warranty and return it on time. Enter your quote's numbers above; the cost-per-year lines settle it for your case.
- What is a money factor in a lease?
- The lease's interest rate expressed as a tiny decimal. Multiply it by 2,400 to convert to an approximate APR: a 0.00125 money factor is about 3%. Dealers sometimes quote it as a larger number like "125" - divide by 240,000 for the decimal form.
- How is a lease payment calculated?
- Monthly depreciation (capitalized cost minus residual, spread over the term) plus a rent charge of (cap cost + residual) times the money factor. Fees ride along upfront or at return. The calculator above assembles exactly these pieces so you can audit the dealer's figure.
- Why do dealers push leasing?
- Lower headline payments move costlier cars, and customers return every three years to buy again. Leases also let dealers profit on the money factor and fees, which are harder to shop than a purchase price. None of that makes leasing wrong - just easier to oversell.
- Can I buy my leased car at the end?
- Yes, for the residual price on the contract plus a purchase-option fee - and that is often a good deal when the market value has run above the residual. Compare the residual to real listings near lease-end before deciding either way.