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Lease vs. Buy Car Calculator
Enter your deal details to see the true cost of leasing vs. buying and which option puts more money in your pocket.
Sources & Methodology
- Kelley Blue Book, vehicle depreciation data and resale value methodology used by banks and leasing companies
- AAA Your Driving Costs (Annual Report), annual total cost of ownership including depreciation, insurance, fuel, and maintenance
- Average Finance Rate on New Car Loans (FRED / Federal Reserve), historical auto loan interest rate data
- CFPB Auto Loans Resource, guidance on understanding lease vs. financing terms and total cost comparisons
By Sean Baldwin · Last reviewed July 2026
The Verdict
Worth it if: buying comes out ahead on total cost for your deal, which is true for most drivers who keep a vehicle past 4-5 years, especially at high annual mileage or a loan rate under 5%.
Not worth it if: leasing wins on total cost for your specific numbers, which usually only happens with an exceptional money factor or a genuine short-term or business-use case.
Break-even threshold: buying overtakes leasing around year 4 to 5 of ownership; hold the vehicle longer than that and buying wins decisively.
Frequently Asked Questions
Is leasing or buying a car cheaper?
Leasing almost always has lower monthly payments, you're only financing the depreciation during the lease term, not the full vehicle cost. But at the end of every lease you own nothing and restart payments. Over a 10-year horizon, buying the same $35,000 car typically costs $5,000–$10,000 less than repeatedly leasing equivalent vehicles, and leaves you with a paid-off asset worth real money. The break-even is typically around year 4–5: if you plan to keep a vehicle longer than that, buying almost always wins. Most Americans keep a purchased car 8–12 years, over that horizon, the owned vehicle wins decisively.
What happens if I go over my lease mileage?
Most leases allow 10,000–15,000 miles per year. Excess mileage typically costs $0.10–$0.25 per mile at lease end, billed all at once, a surprise many lessees don't anticipate. At $0.20/mile overage and 5,000 over-miles per year on a 3-year lease, that's $3,000 due at turn-in on top of your final payment. If you regularly drive 18,000+ miles per year, buying is almost always the better financial decision. You can sometimes pre-purchase additional miles at lease signing for less than the overage rate, worth asking about upfront if you expect to exceed the allowance regularly.
What is residual value?
The residual value is the leasing company's estimate of what the car will be worth at the end of the lease term. It's set by the manufacturer's financial arm, not the dealer, and cannot be negotiated. A higher residual means lower lease payments because you're financing a smaller portion of the vehicle's total depreciation. Residuals vary significantly by model: popular, reliable vehicles like the Toyota RAV4 hold value well and tend to have favorable residuals; luxury vehicles with steep depreciation often have low residuals that inflate lease payments. Comparing residuals across trim levels before committing can meaningfully affect your monthly cost.
Can I negotiate a lease?
Yes, several components are negotiable. The selling price (capitalized cost) is the most impactful: negotiate it as if you were buying the vehicle outright, then apply that price to the lease. A $1,000 reduction in cap cost saves roughly $28/month on a 36-month lease. The money factor sometimes includes a dealer markup above the manufacturer's base rate, ask for the buy rate and compare. Residual value is set by the manufacturer and cannot be negotiated, but you can compare residuals across trim levels. Acquisition fees and dealership add-ons like paint protection or gap insurance are also worth scrutinizing before you sign.
Is leasing worth it for business use?
For businesses, lease payments may be partially or fully deductible as a business expense based on the percentage of business use. Owned vehicles can be depreciated under Section 179 or bonus depreciation, sometimes allowing significant first-year deductions, particularly for vehicles over 6,000 lbs GVWR (many SUVs and trucks qualify). For lighter vehicles, annual deduction limits are much lower. The best approach depends on the vehicle's MSRP, your expected business-use percentage, your marginal tax rate, and intended hold period. A CPA familiar with vehicle deductions is worth consulting for any purchase or lease over $40,000 to determine which structure is more tax-efficient.
What is the best time of year to lease a car?
End of month, end of quarter, and end of model year are historically the strongest times to lease. At month and quarter end, dealers are motivated to hit sales targets and may offer better money factors or cap cost reductions. At model year end (typically August–October for most brands), manufacturers often support outgoing models with subvented money factors and higher residuals to clear inventory, some of the best lease deals of the year emerge in September and October. January through March tends to be the weakest period, as post-holiday inventory is low and manufacturer incentive programs are typically at their minimum.
What happens to a lease if the car is totaled or stolen?
If your leased vehicle is totaled or stolen, your auto insurance pays the car's current market value, which may be less than what you still owe on the lease (remaining payments plus the residual). This gap is why gap insurance is strongly recommended for leases: it covers the difference between the insurance payout and your remaining lease obligation. Many lessors require gap coverage; some include it in the lease contract. If yours doesn't, purchasing it through your own auto insurer is significantly cheaper than through the dealership. Without gap coverage, you could owe several thousand dollars on a vehicle you no longer have.
Is it possible to exit a lease early?
Yes, but early lease termination is typically expensive. Options include: paying an early termination fee (often several thousand dollars), transferring the lease to another person via a lease-swap service (Swapalease or LeaseTrader are the main platforms), or buying out the vehicle at the residual value and reselling it. If the car's market value exceeds the residual, which happened for many vehicles during the 2021–2022 chip shortage, buying out and selling can net you money. A lease transfer is usually the lowest-cost exit path if the vehicle is popular and remaining payments are at or below market rent.
The real cost of leasing vs. buying over 10 years
Leasing looks cheaper on a monthly basis, and it is. But at the end of every lease you own nothing, so you start the payments again. Over 10 years, someone who leases a $35,000 car every 3 years might spend $45,000+ in lease payments and have zero equity. Someone who buys the same $35,000 car, pays it off in 5 years ($700/month), then drives it for 5 more years payment-free, spends $42,000 and owns a car worth $8,000. The buyer is $11,000 ahead, plus 5 years of payment-free driving. The math almost always favors buying for anyone who plans to hold a vehicle more than 4–5 years.
When leasing actually makes financial sense
Leasing makes the most sense in three specific situations: (1) you use the car for business and can deduct lease payments as a business expense, making the after-tax cost significantly lower; (2) you genuinely need a new car every 2–3 years for professional reasons and the depreciation on buying would be equally costly; or (3) the specific lease deal is exceptional, money factor equivalent to under 3% APR and a high residual value. Outside these scenarios, the "lower payment" of a lease is largely an illusion created by the fact that you're never building equity.
Understanding money factor: the hidden interest rate in a lease
The money factor is the lease equivalent of an interest rate, expressed as a tiny decimal (like 0.00125). To convert to APR equivalent, multiply by 2,400: 0.00125 × 2,400 = 3% APR. This is what dealers often obscure, a money factor of 0.0035 sounds small but is 8.4% APR equivalent, higher than most car loan rates. Always ask for the money factor on any lease and convert it to APR for comparison. A good lease deal in 2026 has a money factor equivalent to under 4% APR.
Depreciation: why the first 3 years of car ownership are most expensive
A new car loses about 20% of its value the moment you drive off the lot, and roughly 15% per year for the next several years. A $40,000 car is worth about $32,000 after year 1, $27,000 after year 2, and $23,000 after year 3. By year 6–7, depreciation slows dramatically. This is why buying a 2–3 year old certified pre-owned vehicle is often the best financial decision: you let someone else absorb the steepest depreciation while still getting a reliable, warranty-covered car. The worst financial move is leasing a new car every 3 years, you perpetually pay for the most expensive part of the depreciation curve while building zero equity.
Hidden costs most people miss
Both leasing and buying carry costs that rarely appear in the advertised deal. For leases: a disposition fee ($300–$500 charged at turn-in to cover reconditioning and re-inventory), excess wear-and-tear charges (dents, stained interior, tires below a certain tread depth, evaluated at return and billed separately from mileage overage), and gap insurance (required by most lessors, adding $15–$25/month, cheaper through your own auto insurer than through the dealership). For buying: state registration fees ($100–$700+/year depending on state and vehicle value), extended warranty pressure at signing (typically $2,000–$4,000 for coverage that may duplicate the manufacturer warranty), and the tendency to over-insure a depreciating asset in later years. Neither total in the calculator fully captures every one of these line items, factor them in before signing to get an accurate picture of which option truly wins.
Related Calculators
How We Calculate Your Score
The Worth It Score starts at 50 and adjusts based on whether buying or leasing produces lower total cost, your annual mileage, loan rate, and down payment. The score reflects the financial case for buying (which wins for most drivers) versus leasing.
- · Base score: 50
- · Buying wins: adds 20 points; leasing wins: subtracts 10 points
- · High mileage: over 15,000 miles/year adds 10 points (leases penalize excess mileage at $0.15–$0.25/mile, making buying more efficient for high-mileage drivers)
- · Low loan rate: under 5% APR adds 10 points
- · Down payment: 10%+ of vehicle price adds 5 points
Score reflects total cost of ownership over the comparison period, not monthly payment. Leasing often has a lower monthly payment but higher total cost over time. Score above 70 means buying is clearly the better financial decision for your inputs.
Cite this calculator: Worth It Calculators, "Lease vs. Buy a Car in 2026 — Which Decision Actually Saves You More?," worthitcalculators.com/lease-vs-buy-car/ (updated July 2026).