Break‑Even: Buy vs Lease

Quickly see which option costs less at the month you plan to switch cars, including mileage overage and estimated resale value.

Buy vs lease decision making illustration

Get your answer fast

Use the Buy vs Lease Break‑Even Calculator. Enter your planned months and miles per year, then realistic buy and lease assumptions. The tool shows a recommendation, cost difference, and an approximate break‑even month.

Quick take: If you plan to keep the car 2–3 years and drive average miles, leasing often looks cheaper on monthly cash flow. If you will keep the car 5+ years or rack up miles, buying usually wins on total cost. The calculator confirms the tipping point for your numbers.

What to enter

  • Your horizon: How many months you’ll likely keep the car.
  • Miles per year: Pick a realistic number. Overages are penalized on leases.
  • Buying inputs: Price, down payment, APR, term, taxes, and fees.
  • Leasing inputs: MSRP, residual, money factor, term, drive‑offs, taxes, fees, mileage cap, overage fee, and disposition fee.

How we compare costs at your month

  • Buy path: Down + monthly payments through your month + remaining balance − estimated resale value.
  • Lease path: Drive‑offs + monthly payments through your month + expected mileage overage + disposition at lease end.

Depreciation and resale vary by model and market. Use conservative estimates and cross‑check with comps.

Why this is fair: buyers retain asset value that offsets payments (via resale or trade‑in), while lessees typically return the car and pay overage/wear fees. Comparing both at the same month accounts for that difference and avoids misleading “payment only” decisions.

Tips to tilt the result in your favor

  • Request the residual and money factor in writing. Manufacturer programs can change monthly.
  • Match tax/fee treatment to your state to avoid apples-to-oranges comparisons.
  • Keep mileage realistic. Pre‑buying miles can be cheaper than overage fees.
  • For buying, explore credit unions and pre‑approval to lower APR.
  • Ask dealers about lease cash or subvented programs that boost residuals or cut the money factor; these can shift break‑even several months.
  • On the buy side, consider slightly shorter terms. A lower total interest cost can make buying win sooner, even if the payment is higher.
  • Factor potential EV incentives. Some leases pass through federal or state credits via lower payments; some purchases qualify for direct credits you can net against the price.
  • Price negotiation matters: a lower selling price helps both paths, but buying benefits twice (smaller loan and higher equity percent).

Who typically wins, and why

  • Short keepers (≤ 36 months): Leasing often wins if programs are decent. You’re paying for depreciation during the new‑car years when it’s steep, but subsidized residuals can offset it.
  • Long keepers (60–96 months): Buying usually wins. After the loan ends, your annual cost drops significantly. You can also capture resale value later.
  • High‑mileage drivers: Buying often wins because lease mileage overages and wear fees add up. High mileage also pushes down lease‑end purchase options.
  • Predictable low‑mileage drivers: Leasing can shine with generous residuals and low money factors, especially on models with strong lease support.

Worked examples

These examples use simplified figures. Use the calculator with your real quotes to confirm.

Example A: 36‑month horizon, 12,000 mi/yr (compact SUV)

  • Lease: MSRP $32,000, residual $18,560 (58%), MF 0.0019 (~4.56% APR), $1,800 drive‑off, tax 6.5%, fees $1,100. Estimated: payment ~$385/mo, disposition $395, no overage.
  • Buy: Price $30,000, 6.0% APR, 72‑mo term, $2,500 down, tax 6.5%, fees $500. Payment ~$437/mo. After 36 months: remaining balance ~$16,200; resale ~$18,000.

At month 36: Lease total out‑of‑pocket roughly 36×$385 + $1,800 + $395 ≈ $16, , buying roughly $2,500 + 36×$437 + $16,200 − $18,000 ≈ similar. With strong lease support, leasing edges out; with cheaper financing or a better discount, buying can tie or win.

Example B: 72‑month horizon, 15,000 mi/yr (midsize sedan)

  • Lease: Typical support for 36 months, but you’ll need a second lease to reach 72 months-doubling acquisition and disposition fees and compounding wear/tear.
  • Buy: Moderate APR and steady depreciation. By years 5–6, the loan is nearly paid down; annual cost drops below lease cycles.

Result: Buying generally wins before month 60 and widens the gap as you pass the loan end.

Example C: High mileage, 18,000 mi/yr (crossover)

  • Lease: Overage at $0.25/mile beyond 12,000 adds ~$1,500/year. Over three years, that’s ~$4,500 plus disposition-shifts break‑even toward buying.
  • Buy: Higher miles reduce resale, but there’s no per‑mile fee. If you plan to keep 5+ years, buying often wins decisively.

Advanced considerations

  • Tax rules vary: Many states tax the monthly lease payment; others tax the vehicle price. For buying, some states compute tax after trade‑in credit. Match this in the calculator.
  • Wear and tear: Leasing can incur end‑of‑term charges. If you park on street or expect cosmetic damage, budget extra.
  • Gap coverage: Often included in leases; buyers may need to add it. Account for the premium if relevant.
  • Insurance: Insurance costs can differ slightly between paths based on lender/lessor requirements; include in your broader budget, even if not in the break‑even core math.
  • Buyout flexibility: Some leases have attractive buyout prices if market values hold; others don’t. If you may buy the lease, compare with our Buyout Calculator.
  • Incentives timing: Manufacturer lease support can swing month to month. If your result is near break‑even, re‑check next month’s programs.

How to improve your inputs

  • Use multiple dealer quotes for selling price and lease money factor/residual. Small changes move the break‑even month.
  • Estimate resale value by looking at 3–6 year old comps for the same model/trim and adjusting for miles and condition.
  • Verify all fees: acquisition, doc, DMV, disposition, and any add‑ons. Enter them explicitly rather than guessing.
  • Set a realistic miles per year based on your last 12 months of driving or commute estimate.

Common pitfalls and myths

  • Myth: Lower payment means cheaper overall. Reality: Total cost at your exit month is what matters.
  • Myth: Leasing is always bad because you don’t own. Reality: With strong residuals and low MF, leasing can undercut buying for short horizons.
  • Pitfall: Ignoring overage/wear fees. These can erase a lease advantage.
  • Pitfall: Overestimating resale value. Be conservative; markets change.

What moves break‑even earlier or later?

  • Earlier (favor buying): Lower APR, shorter loan term, bigger discount off MSRP, longer ownership, higher lease overage fees.
  • Later (favor leasing): Higher residuals, lower money factor, lease cash incentives, lower miles, strong brand support.

Related tools

FAQ

Does a lower monthly payment always mean cheaper overall? Not necessarily. Compare total cost at your exit month, not just the monthly.

What if I plan to purchase the car after a lease? Run the lease first, then consider a buyout using our Buyout Calculator.

How accurate is the resale estimate? We use a simple depreciation curve with an optional mileage penalty. Improve accuracy by checking real‑world comps and pricing guides for your model and trim.

Should I roll taxes and fees into a lease or pay upfront? Paying more upfront lowers the monthly but not always total cost. Enter fees accurately and compare both structures.

Can I switch mid‑lease if my mileage changes? It’s possible but may be costly. If your mileage is uncertain, bias toward buying or a higher mileage allowance.