Lease vs. Buy Car Calculator
Free lease vs. buy car calculator. Compare the true net cost of leasing (money factor, residual value, fees) against financing a purchase (loan payments, equity) over the same time period.
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Recommendation
Leasing is cheaper by about $1,113 over 36 months (3 years), mainly because lower lease payments outweigh the equity you'd build by financing a purchase over the same period.
Estimated • Based on your inputs
Net Cost of Leasing
$21,634.24
Net Cost of Buying
$22,747.21
Detailed Breakdown
Disclaimer: This calculator provides estimates for informational purposes only. Results should not be considered financial, tax, or legal advice. Consult a qualified professional for your specific situation.
How This Calculator Works
Calculation methodology and assumptions
This calculator compares the total net cost of leasing versus financing a purchase over the same period (the lease term). Leasing follows the standard federal-disclosure framework for closed-end vehicle leases (the Consumer Leasing Act and Federal Reserve Board Regulation M, whose consumer guide "Keys to Vehicle Leasing" defines these terms): the "adjusted capitalized cost" is the negotiated/gross capitalized cost minus your down payment and trade-in; "residual value" is the leasing company’s projected value at lease-end and is normally quoted as a percentage of MSRP, so MSRP is entered separately from negotiated price; monthly "depreciation" = (net cap cost − residual value) ÷ lease term; the monthly "rent charge" = (net cap cost + residual value) × money factor, where money factor = APR-equivalent ÷ 2400 (an industry convention, not a government-mandated formula); sales tax is applied to each monthly payment (the majority-state method); and acquisition, disposition, and excess-mileage charges are added. Financing uses standard loan amortization. The same MSRP-based residual estimate proxies the bought vehicle’s market value at the comparison horizon; signed equity (market value minus remaining loan balance) is subtracted from cash paid, so negative equity correctly increases the cost of buying. Use exact quote figures and check your state’s lease-tax method.
How to Use This Auto Calculator
- 1
Enter the vehicle price
Input the purchase price or MSRP of the vehicle. Include any add-ons, destination charges, or dealer fees as applicable.
- 2
Set financing terms
Enter your expected interest rate, down payment or trade-in value, and loan term (36–84 months). Shorter terms mean higher payments but significantly less total interest.
- 3
Review sales tax impact
The calculator applies your state's sales tax to show the true total cost. Some states tax the full price, others tax after trade-in deduction.
- 4
Analyze total cost of ownership
Look beyond the monthly payment. Total interest paid, sales tax amount, and effective price after trade-in reveal the real cost of the vehicle purchase.
Example Calculation
What does financing a $35,000 vehicle look like in this state?
On a $35,000 vehicle with $5,000 down and a 6.5% APR for 60 months: your loan amount is $30,000, resulting in a monthly payment of approximately $587. Total interest over the loan: $5,219. Sales tax adds to the total, bringing your total cost to approximately $42,319.
Result: Choosing a shorter loan term increases the monthly payment but saves meaningfully on interest, while a longer term lowers the payment but adds interest over time. Always calculate the total cost — including your state's sales tax — not just the monthly payment.
What Affects Your Results
Interest Rate (APR)
Your credit score drives the rate more than anything else. Excellent credit (750+) might get 4-5%; fair credit (650) could mean 8-10%+. Even 1% difference on a $30K loan = $900+ over 60 months.
Loan Term
Longer terms = lower payments but more total interest and longer periods of being underwater. The sweet spot is usually 48-60 months for budget/total-cost balance.
Sales Tax Rate
State and local sales tax adds significantly to vehicle cost. Five states have no sales tax on vehicles; others charge up to 10%+.
Down Payment & Trade-In
A larger down payment reduces your loan amount, monthly payment, and total interest. It also helps avoid being underwater on the loan.
Tips & Best Practices
- Get pre-approved from your bank or credit union before visiting the dealer. This gives you negotiating leverage and a rate baseline to compare against dealer financing.
- Factor in your state's sales tax when budgeting. On a $35,000 vehicle, sales tax alone could be $1,500–$3,000+ depending on your state and local rates.
- Avoid 72+ month loans if possible. While the monthly payment is lower, you'll likely be "underwater" (owing more than the car is worth) for years and pay thousands extra in interest.
- Trade-in timing matters. In some states, the trade-in value reduces the amount subject to sales tax — effectively saving you tax on that amount.
- Don't forget insurance costs. High-value vehicles, sports cars, and luxury models carry significantly higher insurance premiums. Get an insurance quote before committing.
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StateCalc Team
Editorial Team
The StateCalc team builds free financial calculators using data from official government sources including the IRS, U.S. Census Bureau, BLS, and state revenue departments. All formulas are validated by an automated test suite and cross-referenced against published data.
Our editorial standardsFrequently Asked Questions
Is it cheaper to lease or buy a car?
It depends on how long you keep the car, how much you drive, and the specific loan/lease rates and fees you’re offered. Leasing usually has lower monthly payments over a shorter term, but you build no equity and must return the car (or buy it) at lease-end. Buying has higher payments but you keep the car’s value. Use the calculator above with your own numbers -- the "cheaper" answer flips depending on your specific offer and driving habits.
What is a money factor and how do I convert it to an APR?
The money factor is how leasing companies express the lease’s implicit finance rate, usually as a small decimal like 0.00208. To convert it to an APR-equivalent, multiply by 2400: 0.00208 × 2400 = 5% APR-equivalent. This calculator asks for the APR-equivalent number directly.
What is residual value in a car lease?
Residual value is the leasing company’s projection of what the car will be worth at the end of the lease, expressed as a percentage of the original price (typically 45-65% for a 36-month lease). A higher residual value generally means a lower monthly payment, since you’re only paying for the depreciation between the price and that projected future value.
What happens if I drive more than my lease’s mileage allowance?
You’ll owe an excess-mileage charge for every mile over your lease’s annual allowance (commonly 10,000-15,000 miles/year), typically $0.10-$0.25 per mile per Federal Reserve Board consumer guidance. If you drive significantly more than average, buying (which has no mileage limit) is often the better financial choice.
Can I deduct interest if I lease instead of finance a car purchase?
No. The federal "No Tax on Car Loan Interest" deduction (26 U.S.C. Sec. 163(h)(4)) only applies to interest on a loan used to purchase a qualifying new vehicle -- lease payments are explicitly excluded under Sec. 163(h)(4)(B)(ii), regardless of how the lease is structured.
What fees are involved in leasing a car?
Common lease-specific fees include an acquisition fee (charged upfront or rolled into the cap cost, typically $200-$1,000), a disposition fee (charged at lease-end if you don’t buy the car, typically $300-$500), and excess-mileage and excess-wear charges. Buying instead avoids all of these lease-specific fees, though it has its own costs (sales tax on the full price, and it finances 100% of the depreciation rather than just the portion used during the lease).
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