Lease vs Buy Car Calculator

It depends on your driving habits, financial goals, and how long you plan to keep the vehicle. Leasing typically offers lower monthly payments and lets you drive a new car every few years, but you build no equity. Buying costs more upfront and has higher monthly payments, but you own the asset outright and can sell it later to recoup some costs.

Leasing costs include your monthly lease payments, a down payment (cap cost reduction), an acquisition fee, sales tax, and a disposition fee at the end of the lease. Additional costs can arise if you exceed your mileage allowance or return the car with excessive wear and tear.

MSRP stands for Manufacturer's Suggested Retail Price — the sticker price of the vehicle. For leasing, the MSRP determines the capitalized cost, which influences your monthly lease payment. Negotiating a lower selling price before leasing can reduce your monthly payments.

The residual value is the estimated worth of the vehicle at the end of the lease term, set by the leasing company. A higher residual value means you're financing less depreciation, which typically results in lower monthly payments. It also determines the buyout price if you decide to purchase the car at lease end.

Common lease fees include an acquisition fee (charged by the lender to arrange the lease), a disposition fee (charged when you return the car), excess mileage charges, and wear-and-tear fees. Always factor these into your total lease cost comparison.

Buying builds equity because you own the vehicle after paying off the loan and can sell it for its resale value. Leasing builds no equity — you return the car at the end of the term. However, leasing frees up cash that can be invested elsewhere, so the best choice depends on your overall financial strategy.

A larger down payment on a lease (called a cap cost reduction) lowers your monthly payments, but many financial experts advise against large lease down payments. If the car is totaled or stolen, you may lose that money, and the savings per month are often modest.

When you buy a car, you typically pay sales tax on the full purchase price upfront. When you lease, in most states you only pay sales tax on each monthly payment rather than the total vehicle value, which can make leasing more tax-efficient depending on your state's rules.