The Three Variables that Decide It
Leases shine when you prefer a new car every three years, drive predictable miles, and value a lower monthly payment. Buying wins if you keep cars for a long time, drive above‑average miles, or want equity at the end. The calculator compares total out‑of‑pocket during your ownership horizon, including taxes and fees.
Money Factor, Residual, and Cap Cost
Your lease payment is driven by the vehicle’s residual value, the money factor (convertible to APR), and the capitalized cost (sale price minus incentives and down payment). Small improvements in each can add up to meaningful savings. Always compare the dealer’s worksheet to your calculator results.
Mileage Assumptions Matter
If you regularly exceed 12,000–15,000 miles per year, buying may be cheaper once you include overage fees and potential wear‑and‑tear charges. Conversely, low‑mileage drivers can exploit strong residuals to keep payments lower with leasing.
Compare on the Same Horizon
Pick an ownership horizon—say, six years. Compare two back‑to‑back leases over six years vs. buying for six and then selling or trading. Include realistic resale value and taxes in both scenarios.
Real‑World Examples
Example: New compact SUV, MSRP $34,000. Lease: 36 months, 10k/yr, money factor equivalent ≈ 3.2% APR, residual 60%, drive‑off $2,500. Buy: 60 months at 6.5% APR with $2,500 down. Compare 6‑year total out‑of‑pocket (lease twice vs. buy and resell at year six). In many cases, buying costs more per month but wins on total cost if you keep the car longer than the loan term.
FAQ
Can I buy extra miles upfront?
Yes, and it’s usually cheaper than paying overage fees later. Add the cost to your lease scenario in the calculator.
Is leasing ever better for high‑mileage drivers?
Rarely, unless the residuals are unusually strong and extra‑mile pricing is favorable. Model both paths before deciding.
Buyout Math (If You Fall in Love)
Many drivers want to buy their lease at the end. Compare the buyout price plus taxes/fees against the car’s retail value and a comparable used‑car purchase. Financing a buyout uses the same loan math—plug the buyout into the auto loan calculator and ensure the numbers still fit.
Related Reading
- Pillar: Auto Loan Calculator Guide
- Car Loan Interest Rates
- Car Affordability Calculator
- Car Loan Amortization
- Trade‑In Value Guide
- Auto Refinance Calculator
- Car Down Payment Guide
- Car Sales Tax Calculator
- Car Loan Early Payoff Calculator
Related Tools
- Total Cost of Ownership Calculator — Compare true 5-year costs for both lease and buy scenarios
- Buy vs Lease Calculator — Interactive comparison tool