Is leasing always more expensive than buying?

Not necessarily, especially over the lease term itself. The intuition 'leasing is throwing money away' is partially right (you have nothing at lease-end) but ignores that during the lease term, you pay only for depreciation, not the full car value. For 3 years on a typical $40K car: lease total $20-25K out-of-pocket; finance total $15-20K + $20K equity at year 3. The lease loses if you sell/trade after 3 years (lose the equity value); the lease ties if you keep the car 6-9 years (depreciation eats the equity); the lease wins if you constantly trade. Math depends on your ownership horizon.

What's a money factor and why does it matter?

Money factor is leasing's equivalent of an interest rate — but expressed as a tiny decimal (0.00125, 0.00250) rather than a percent. Multiply MF by 2400 to get equivalent APR. So MF 0.00125 = 3% APR; MF 0.00250 = 6% APR. Dealers profit by quietly inflating MF when you don't ask — the manufacturer's published 'lease deal' might be 0.00100 (2.4% APR) but the dealer will quote 0.00200 (4.8%) and pocket the difference. Always ask: 'What's the money factor on this lease?' Then look up the manufacturer's published rate at sites like LeaseHackr to see if you're being marked up.

Should I put money down on a lease?

Generally no. Down payment on a lease reduces monthly payment but is largely lost if the car is totaled in year 1 (gap insurance is included on most leases but doesn't refund your down payment to you, only to the lessor). Lease pros recommend zero down — pay only the inception fees ($1,500-3,500) at signing. The total cost over the term is the same; you just shift payments around. Exception: 'one-pay lease' where you pay the entire lease upfront in exchange for a lower MF — only worth it if you have the cash and the discount is meaningful (usually 1-2% effective discount).

What happens at the end of a lease?

Three options: (1) Return the car to the dealer. They inspect for excess wear ($500-2,000 typical charges for chips, scratches, dings, stained interior). Pay any over-mileage. Walk away. (2) Buy the car at the residual value (specified at lease signing, usually 50-60% of MSRP). If the residual is below current market value, this is a bargain — you can buy and resell for profit. (3) Trade for another lease. Roll equity (or negative equity — extra you owe) into the new deal. Compare to walking away and starting fresh. Don't accept the first offer; lease-end is where dealers make easy profit.

Are lease deals advertised as 'great' actually great?

Sometimes. Manufacturer-subsidized leases on slow-selling models can be exceptional ($199/month on a $40K vehicle, when the math 'shouldn't' work) — those are usually buying deals where the manufacturer is essentially paying you to take the car. The catch is they're often: (a) $3K+ down, (b) 10K-mile limit, (c) regional (only in California), (d) tied to a specific trim/color you might not want. Read the fine print — the advertised 'lease for $XXX/month' assumes a specific MSRP, term, mileage, down payment, and credit tier. Your actual offer almost always differs. The MF and residual matter more than the headline payment.

What about subscription services like Care by Volvo or Audi Select?

Subscriptions bundle lease, insurance, maintenance, and roadside into one monthly payment. They're more expensive than separate lease + insurance + maintenance, but offer flexibility (swap cars, return without penalty). For someone who wants 6 months in a car without commitment, subscriptions make sense. For someone who wants long-term cost optimization, traditional lease or finance wins. The subscription market has shrunk since 2020 — most premium brands (BMW, Mercedes, Cadillac) discontinued their subscription programs because they couldn't make them profitable. Volvo and a few startups (Autonomy, FlexCar) still operate.

Money & Finance · Free tool

Lease vs Buy Calculator

Compare total cost of leasing a car vs financing one over the same term. Includes fees, down payment, residual value, and mileage penalties.

Updated June 2026

Lease

Monthly payment ($)Term (months)Upfront fee / down ($)Mileage cap (total)Miles driven / yearOver-mileage $/mile

Buy / Finance

Vehicle price ($)Down payment ($)APR (%)Finance term (months)Residual value at lease-end ($)

Lease total over 36 mo

Monthly × term$12,600.00

Upfront$2,000.00

Over-mileage penalty$2,250.00

Total$16,850.00

Buy cost over 36 mo

Estimated monthly$547.85

Down payment$4,000.00

Less residual value-$18,000.00

Net total$5,722.68

Verdict (estimate): Buying is $11,127.32 cheaper over 36 months.

Estimates only. Does not include insurance, taxes, fees, maintenance, opportunity cost on down payment, or depreciation risk. Use for rough comparison.

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What it does

Compare the total cost of leasing a car vs financing one over the same term. Inputs: MSRP, sale price (negotiated), down payment, lease term (24/36/39 months typical), residual value (% of MSRP at lease end), money factor (MF — leasing’s equivalent of interest rate), or finance APR + loan term, mileage allowance + over-mileage penalty, expected actual mileage, sales tax. Output: total out-of-pocket over the term for each path, plus the equity at term end (zero for lease, residual value for finance) and effective monthly cost when adjusting for trade-in or sale at term end.

The lease-vs-buy decision usually comes down to: How long do you keep cars?If 3 years and trade up: leasing often wins because you pay only for the depreciation during your use, not the full vehicle. If 5+ years: financing wins because you pay no depreciation past the loan and own the asset. How predictable is your annual mileage? Leases penalize over-mileage at $0.20-0.30/mile (e.g., 5K over = $1,000-1,500 surprise bill at lease-end); if your driving is variable, finance avoids this risk. Tax treatment: business use favors leasing in many cases (full lease payment deductible vs only depreciation portion of finance payment), though IRS Section 179 depreciation can flip this for heavy SUVs.

Common pitfalls: (1) Money factor isn’t obvious — multiply MF by 2400 to get the equivalent APR (e.g., MF 0.00125 = 3% APR). Dealers profit by inflating MF; always negotiate. (2) Down payment on a lease reduces monthly payment but is largely lost if the car is totaled in year 1 (gap insurance covers this only for financed loans by default). Most lease-pros recommend zero down payment. (3) Lease inception fees (acquisition fee $500-995, doc fee $300-700, first month payment + security deposit) total $1,500-3,500 at signing — separate from down payment. (4)Lease-end inspection charges for “excess wear” (chips, scratches, interior damage) routinely add $500-2,000 at turn-in; budget for it or buy excess-wear protection at lease signing.

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How to use it

Enter MSRP and your negotiated sale price (cap cost). The lower the cap cost, the better the lease deal.
Enter down payment (or zero — for leases, zero down is usually recommended).
For lease: enter term (24/36/39 months), residual value % (typically 50-60% for 36-month lease), and money factor (MF × 2400 = APR equivalent).
For finance: enter APR and loan term (60-72 months typical).
Enter expected annual mileage. Lease default is 10K/year; bumping to 15K typically adds $20-40/month. Over-mileage penalty is $0.15-0.30/mile.
Read total cost over the term for each. Lease total = monthly payments × term + inception fees + likely excess-wear charges + over-mileage if applicable. Finance total = down payment + monthly payments × term, with residual value as 'equity' you keep.

When to use this tool

Considering a new car — both lease and finance offers warrant comparison; one is rarely strictly better than the other.
End of current lease — should you lease again, finance the residual, or walk away and shop a different car?
High-mileage drivers — leasing often loses for 20K+/year drivers due to over-mileage penalties; calculation makes this concrete.
Self-employed / business use — different tax treatments for lease vs finance can swing the math by thousands; check with your accountant.

When not to use it

Used cars — leasing used cars is rare and rarely advantageous; finance is the default.
Cash purchases — no APR involved; the buy decision is just about price negotiation, not financing structure.
Cars you'd keep for 8-10+ years — leasing is essentially never the right answer for very long-term ownership; the math always favors buy.
Subprime credit (sub-660 FICO) — leasing requires good credit; subprime borrowers will face MFs equivalent to 10-20% APR or be rejected outright.

Common use cases

Pre-decision sanity-check on inputs and outputs
Educational use — demonstrating the underlying concept
Onboarding a colleague who needs the same calculation/conversion
Verifying a number or output before passing it on

Frequently asked questions

Is leasing always more expensive than buying?: Not necessarily, especially over the lease term itself. The intuition 'leasing is throwing money away' is partially right (you have nothing at lease-end) but ignores that during the lease term, you pay only for depreciation, not the full car value. For 3 years on a typical $40K car: lease total $20-25K out-of-pocket; finance total $15-20K + $20K equity at year 3. The lease loses if you sell/trade after 3 years (lose the equity value); the lease ties if you keep the car 6-9 years (depreciation eats the equity); the lease wins if you constantly trade. Math depends on your ownership horizon.
What's a money factor and why does it matter?: Money factor is leasing's equivalent of an interest rate — but expressed as a tiny decimal (0.00125, 0.00250) rather than a percent. Multiply MF by 2400 to get equivalent APR. So MF 0.00125 = 3% APR; MF 0.00250 = 6% APR. Dealers profit by quietly inflating MF when you don't ask — the manufacturer's published 'lease deal' might be 0.00100 (2.4% APR) but the dealer will quote 0.00200 (4.8%) and pocket the difference. Always ask: 'What's the money factor on this lease?' Then look up the manufacturer's published rate at sites like LeaseHackr to see if you're being marked up.
Should I put money down on a lease?: Generally no. Down payment on a lease reduces monthly payment but is largely lost if the car is totaled in year 1 (gap insurance is included on most leases but doesn't refund your down payment to you, only to the lessor). Lease pros recommend zero down — pay only the inception fees ($1,500-3,500) at signing. The total cost over the term is the same; you just shift payments around. Exception: 'one-pay lease' where you pay the entire lease upfront in exchange for a lower MF — only worth it if you have the cash and the discount is meaningful (usually 1-2% effective discount).
What happens at the end of a lease?: Three options: (1) Return the car to the dealer. They inspect for excess wear ($500-2,000 typical charges for chips, scratches, dings, stained interior). Pay any over-mileage. Walk away. (2) Buy the car at the residual value (specified at lease signing, usually 50-60% of MSRP). If the residual is below current market value, this is a bargain — you can buy and resell for profit. (3) Trade for another lease. Roll equity (or negative equity — extra you owe) into the new deal. Compare to walking away and starting fresh. Don't accept the first offer; lease-end is where dealers make easy profit.
Are lease deals advertised as 'great' actually great?: Sometimes. Manufacturer-subsidized leases on slow-selling models can be exceptional ($199/month on a $40K vehicle, when the math 'shouldn't' work) — those are usually buying deals where the manufacturer is essentially paying you to take the car. The catch is they're often: (a) $3K+ down, (b) 10K-mile limit, (c) regional (only in California), (d) tied to a specific trim/color you might not want. Read the fine print — the advertised 'lease for $XXX/month' assumes a specific MSRP, term, mileage, down payment, and credit tier. Your actual offer almost always differs. The MF and residual matter more than the headline payment.
What about subscription services like Care by Volvo or Audi Select?: Subscriptions bundle lease, insurance, maintenance, and roadside into one monthly payment. They're more expensive than separate lease + insurance + maintenance, but offer flexibility (swap cars, return without penalty). For someone who wants 6 months in a car without commitment, subscriptions make sense. For someone who wants long-term cost optimization, traditional lease or finance wins. The subscription market has shrunk since 2020 — most premium brands (BMW, Mercedes, Cadillac) discontinued their subscription programs because they couldn't make them profitable. Volvo and a few startups (Autonomy, FlexCar) still operate.

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