Auto Loan & Lease-vs-Buy Calculator
Compare financing a car against leasing it.
Negotiated price net of any cap-cost reductions.
Lease-end value of the vehicle.
Decimal rate (e.g. 0.0025). APR% = money factor × 2400.
Quoted rate if you finance the purchase instead of leasing.
Lease monthly payment
- Lease: depreciation
- $388.89
- Lease: finance (rent)
- $140.00
- Lease: equivalent APR
- 6%
- Buy: loan monthly payment
- $684.82
- Buy: total interest
- $6,088.83
The lease base payment is before taxes and fees. The buy side finances the same net cap cost at your quoted APR and term. A lease usually costs less per month, but you own nothing at the end.
How the lease vs buy calculator works
A lease payment has two parts. The depreciation charge spreads the value the car loses during the term, and the finance charge (often called rent) is the lessor’s cost of capital. This tool computes both, adds them, and converts the lease’s money factor into a plain APR so you can line it up against a loan rate.
The formulas are exact:
- Depreciation =
(netCapCost - residual) / termMonths - Finance (rent) =
(netCapCost + residual) * moneyFactor - Base payment = depreciation + finance
- Equivalent APR =
moneyFactor * 2400
The net cap cost is the negotiated price after any cap-cost reductions. The residual is the contract value of the car at lease-end. Notice the finance charge multiplies the sum of cap cost and residual, not just the amount financed, which is the standard lease convention. The buy side runs the same fully amortizing loan engine used across the site: M = P*r / (1 - (1+r)^-n), with r the monthly rate.
Worked example
Lease a vehicle with a net cap cost of $32,000, a residual of $18,000, a 36 month term, and a money factor of 0.00250. Compare against financing the same $32,000 over 36 months at 6 percent.
| Item | Value |
|---|---|
| Depreciation: (32,000 − 18,000) ÷ 36 | $388.89 |
| Finance: (32,000 + 18,000) × 0.00250 | $125.00 |
| Base lease payment | $513.89 |
| Money factor as APR: 0.00250 × 2400 | 6.00% |
| Loan payment: 32,000 × 0.005 ÷ (1 − 1.005⁻³⁶) | $973.50 |
At the same 6 percent rate the lease costs $513.89 a month and the loan costs $973.50. The lease is lower because it only funds the $14,000 the car depreciates plus rent, while the loan repays the entire $32,000.
How to use it
- Enter the net cap cost, not the sticker price. Subtract any rebate or trade equity applied as a cap-cost reduction first.
- Get the residual and money factor from the lease worksheet, not the advertised payment. They drive the result far more than the headline number does.
- Read the equivalent APR to judge the money factor. Anything well above the prevailing loan rate for your credit is a marked-up lease.
- To compare buying, enter the cap cost as the loan principal and your quoted loan APR and term on the buy side.
Limitations
This is the base payment only. It excludes sales tax (which several states levy on each payment), acquisition and disposition fees, registration, gap coverage, and any drive-off cash, all of which vary by location and contract. It also does not value what you own at the end: a financed car becomes an asset, a leased one is returned. Mileage caps and wear charges can add real cost to a lease and are not modeled here. Treat the output as an estimate for comparison, not financial advice; confirm the actual figures on your signed worksheet before deciding.
Frequently asked questions
What is a money factor and why is it written as a tiny decimal?
A money factor is how leases quote their finance charge. It is a small decimal like 0.00250 instead of a percentage. Multiply it by 2400 to read it as an APR, so 0.00250 equals 6 percent. Quoting it as a decimal makes the rate harder to compare at a glance, which is exactly why this tool converts it for you.
Why is my lease payment lower than the loan payment on the same car?
A lease only pays for the depreciation during the term plus a finance charge, not the full value of the car. The loan pays the car off in full. The lower lease payment is not a discount: at lease-end you own nothing, while the loan leaves you with a paid-off vehicle worth roughly its residual.
Does a lower money factor always mean a cheaper lease?
No. The finance charge depends on the money factor and on the sum of cap cost plus residual, but the depreciation component (cap cost minus residual, divided by term) is usually the larger part of the payment. A car with a high residual leases cheaply even at an average money factor, because there is less value to depreciate.
Are taxes, fees, and the down payment included in the payment?
No. The figure here is the base monthly payment from depreciation and finance only. Sales tax, acquisition and disposition fees, registration, and any drive-off amount are added separately and vary by location and dealer.
What happens to the residual value at the end of the lease?
The residual is the price set in the contract to buy the car at lease-end. If the market value is higher you can buy it and keep the gain or sell it; if it is lower you simply return the car. This calculator uses the residual to size depreciation, not to model the buyout decision.