Car Lease vs. Buy Calculator

The lease vs. buy decision is one of the most misunderstood in personal finance. Leasing is often marketed as a way to drive a nicer car for less money per month — and that's technically true. But the monthly payment comparison is deeply misleading because at the end of a lease, you own nothing. At the end of a purchase, you own an asset.

When you lease, you're essentially paying for the depreciation of the vehicle during the lease term, plus a finance charge (called the "money factor," which is like an interest rate). A typical new car depreciates 40–50% in the first three years — and that's exactly what your lease payments are covering. You also face mileage limits (typically 10,000–15,000 miles/year), wear-and-tear charges, and a disposition fee at the end.

When you buy, your payments are higher, but you're building equity in an asset. After the loan is paid off, you have a car with no monthly payment. The key variable is depreciation — if the car holds its value well (like a Toyota or Honda), buying is almost always better long-term. If the car depreciates rapidly (like many luxury vehicles), leasing can sometimes make sense.

The one scenario where leasing clearly wins: business use. If you use the vehicle for business, lease payments may be fully deductible as a business expense, which can make leasing significantly cheaper on an after-tax basis.