Lease vs Buy Calculator
Should I Lease or Buy a Car?
Lease vs Buy Calculator
Auto Lease Results
Auto Buy Results
Total Cost Visualization
Payment Amortization Table
| Month | Payment | Depreciation | Interest | Tax |
|---|
| Month | Payment | Principal | Interest | End Balance |
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Lease vs Buy Guide
A lease vs buy decision is not only about the monthly payment. You should also compare total ownership cost, sales tax treatment, residual value, money factor, mileage limits, and how long you plan to keep the vehicle.
Lease
Usually offers a lower monthly payment and easier access to newer vehicles, but mileage limits and return conditions apply.
Buy
Usually costs more per month, but you build ownership equity and avoid lease-end mileage or wear charges.
Key Rule
If you change cars every 2–3 years, leasing may be attractive. If you keep cars 5+ years, buying often wins on total cost.
State Lease Tax Comparison
Auto lease tax treatment varies by state. Some states tax the total lease amount, while others tax the monthly payment. The difference can materially change your lease cost.
| State | Tax Rate | Tax Method | Estimated Monthly Tax Example: $50,000 Vehicle |
|---|---|---|---|
| California | 7.2% | Total lease amount taxed | $37 |
| New York | 4.0% | Total lease amount taxed | $20 |
| Texas | 6.3% | Monthly payment taxed | $32 |
| New Jersey | 6.6% | Total lease amount taxed | $33 |
| Illinois | 6.3% | Monthly payment taxed | $32 |
| Florida | 6.0% | Monthly payment taxed | $30 |
| Washington | 6.5% | Total lease amount taxed | $33 |
| Virginia | 4.2% | Monthly payment taxed | $21 |
| Georgia | 4.0% | Total lease amount taxed | $20 |
| Ohio | 5.8% | Monthly payment taxed | $29 |
How Money Factor Affects Your Lease Payment
Money factor is one of the most important numbers in a lease. Dealers often quote it as a small decimal, such as 0.00125, which can make it hard to understand. A higher money factor means a higher monthly finance charge.
The approximate APR equivalent is:
APR (%) = Money Factor × 2,400
| Money Factor | Equivalent APR | Monthly Finance Charge | Total Interest Over 36 Months |
|---|---|---|---|
| 0.00050 | 1.2% | $36 | $1,296 |
| 0.00100 | 2.4% | $73 | $2,628 |
| 0.00150 | 3.6% | $109 | $3,924 |
| 0.00200 | 4.8% | $145 | $5,220 |
| 0.00250 | 6.0% | $181 | $6,516 |
Example based on an adjusted capitalized cost of $45,000 plus a residual value of $27,500.
Money Factor to APR Reference Table
Use this table to quickly convert a dealer's money factor quote into a more familiar APR estimate. Always ask the dealer to disclose the money factor clearly.
| Money Factor | Equivalent APR | Rating |
|---|---|---|
| 0.00050 | 1.2% | Very Low |
| 0.00100 | 2.4% | Excellent |
| 0.00125 | 3.0% | Excellent |
| 0.00150 | 3.6% | Excellent |
| 0.00175 | 4.2% | Good |
| 0.00200 | 4.8% | Good |
| 0.00250 | 6.0% | Good |
| 0.00300 | 7.2% | Average |
Why Residual Value Is Critical in a Lease
Residual value is one of the biggest drivers of your lease payment. The higher the residual value, the less depreciation you pay during the lease term.
The example below assumes a $50,000 vehicle, a 36-month lease, and an adjusted capitalized cost of $45,000.
| Residual Percentage | Residual Value | Total Depreciation | Monthly Depreciation 36 Months |
|---|---|---|---|
| 65% | $32,500 | $12,500 | $347 |
| 60% | $30,000 | $15,000 | $417 |
| 55% | $27,500 | $17,500 | $486 |
| 50% | $25,000 | $20,000 | $556 |
| 45% | $22,500 | $22,500 | $625 |
This is why vehicles with strong residual values, such as many Toyota and Lexus models, often lease better than similarly priced vehicles with weaker resale values.
Lease vs Buy Decision Framework
Use the table below as a quick guide. The right answer depends on your driving habits, cash flow, tax situation, and how long you want to keep the vehicle.
| Decision Factor | Lease May Be Better | Buy May Be Better |
|---|---|---|
| Ownership Period | You change cars every 2–3 years | You keep cars for 5+ years |
| Annual Mileage | You drive under 15,000 miles per year | You drive more than 15,000 miles per year |
| Monthly Cash Flow | You prefer a lower monthly payment | You can handle a higher payment to own the car |
| Vehicle Preference | You like the latest model, technology, and warranty coverage | You are comfortable keeping the same vehicle long term |
| Customization | You do not plan to modify the vehicle | You want to customize or modify the vehicle |
| Business Use | Lease payments may be deductible, depending on use and tax rules | Depreciation and loan interest may be deductible, depending on use and tax rules |
| Long-Term Total Cost | May be attractive over a short 2–3 year period | Often cheaper over 5+ years |
Popular Lease Vehicle Comparison
Some brands lease better because they combine strong residual values, competitive money factors, manufacturer incentives, or tax credits.
| Brand / Model | Typical Monthly Payment | Residual Value Range | Why Shoppers Lease It |
|---|---|---|---|
| Tesla Model Y | $450–$600 | 50%–58% | EV incentives, technology, low maintenance |
| BMW X3 / X5 | $500–$750 | 55%–60% | Brand recognition, premium driving experience, MSD options may reduce money factor |
| Lexus RX / NX | $450–$650 | 58%–63% | High reliability, strong residual value, quiet and comfortable ride |
| Toyota RAV4 / Camry | $300–$420 | 60%–66% | Low money factors, high residual values, practical ownership costs |
| Mercedes-Benz GLC / C-Class | $550–$750 | 52%–58% | Luxury feel, brand value, strong feature packages |
Typical monthly payment ranges assume MSRP-based lease structures, approximately $2,000–$3,000 due at signing, and a 36-month lease. Actual payments vary by trim, location, incentives, credit tier, mileage allowance, and dealer pricing.
What Happens at the End of a Lease?
Start reviewing your options about 2–3 months before your lease ends. You usually have three choices:
This is the simplest option. You return the car, pay any disposition fee, and cover possible excess mileage or excess wear charges.
You purchase the vehicle at the contract residual value. This can be attractive if the market value is higher than your buyout price.
You start a new lease. Same-brand loyalty programs may offer discounts, waived disposition fees, or other incentives.
Lease-End Checklist
- Check your current mileage against your lease mileage allowance.
- Schedule a pre-return inspection if available.
- Compare your residual value with market prices from sources such as KBB, Carvana, or dealer offers.
- Ask the dealer about loyalty incentives or waived disposition fees.
- Get buyout financing quotes before the lease maturity date if you plan to purchase the vehicle.
Bottom Line
Leasing can be a good choice if you want a lower monthly payment, drive predictable mileage, and like replacing your car every few years. Buying is usually better if you keep vehicles long term, drive a lot, or want full ownership flexibility.
Use the calculator above to compare the monthly payment, amount due at signing, total lease cost, total loan cost, and total cost to own after the lease ends.
How Monthly Lease Payments are Calculated?
Example Calculation
Input Values:
- Auto Price: $50,000
- Lease Term: 36 months
- Interest Rate: 5%
- Down Payment: $10,000
- Trade Allowance: $2,000
- Sales Tax: 7%
- Residual Value: $24,000
Monthly Lease Payment: $554.32
Formula: Monthly Depreciation + Monthly Interest + Monthly Tax
Calculation: 388.89 + 129.17 + 36.26 = $554.32
1. Monthly Depreciation: $388.89
Formula: (Auto Price - Down Payment - Trade Allowance - Residual Value) ÷ Lease Term
Calculation: (50,000 - 10,000 - 2,000 - 24,000) ÷ 36 = $388.89
2. Money Factor: 0.00208333
Formula: Annual Interest Rate ÷ 24
Calculation: 5% ÷ 24 = 0.00208333
*When user selects Annual Interest Rate (%), we calculate Money Factor. When user selects Money Factor, we calculate Annual Interest Rate.
3. Monthly Interest: $129.17
Formula: (Auto Price - Down Payment - Trade Allowance + Residual Value) × Money Factor
Calculation: (50,000 - 10,000 - 2,000 + 24,000) × 0.00208333 = $129.17
4. Money Factor Equivalent APR: 5%
Formula: Money Factor × 24
*This equals the Annual Interest Rate and displays as Money Factor Equivalent APR
5. Monthly Tax: $36.26
Formula: (Monthly Depreciation + Monthly Interest) × Sales Tax (%)
Calculation: (388.89 + 129.17) × 7% = $36.26
Additional Cost Calculations
Down Payment: $10,000
As entered by user
Upfront Tax: $700
Formula: Down Payment × Sales Tax (%)
Calculation: $10,000 × 7% = $700
Amount Due at Signing: $10,700
Formula: Down Payment + Upfront Tax
Calculation: $10,000 + $700 = $10,700
Sales Tax to Own After Lease Ends: $1,680
Formula: Residual Value × Sales Tax (%)
Calculation: $24,000 × 7% = $1,680
Total Lease Payments: $19,955.52
Formula: (Monthly Depreciation + Monthly Interest + Monthly Tax) × Lease Term
Calculation: (388.89 + 129.17 + 36.26) × 36 = $19,955.52
Total Cost to Own After Lease Ends: $58,335.52
Formula: Down Payment + Total Lease Payments + Trade Allowance + Sales Tax to Own + Residual Value + Upfront Tax
Calculation: $10,000 + $19,955.52 + $2,000 + $1,680 + $24,000 + $700 = $58,335.52
What Is the Auto Lease Calculation Formulas?
Monthly Lease Payment Formula:
Monthly Payment = Monthly Depreciation + Monthly Interest + Monthly Tax
Where:
- Monthly Depreciation = (Auto Price - Down Payment - Trade Value - Residual Value) ÷ Term in Months
- Monthly Interest = (Auto Price - Down Payment - Trade Value + Residual Value) × Money Factor
- Monthly Tax = (Monthly Depreciation + Monthly Interest) × Sales Tax Rate
Money Factor Conversion:
APR = Money Factor × 24 × 100
Money Factor = APR ÷ 100 ÷ 24
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