The lease vs buy calculator settles a comparison that most people run incorrectly: they compare the lease payment to the loan payment and stop there. That comparison is misleading, because at the end of a lease you own nothing, while at the end of a loan β or even partway through one β you own an asset with real resale value. This tool corrects for that by crediting the buyer with the equity retained in the vehicle, so the two paths are compared on total cost, not monthly payment alone.
Arb Digital builds tools like this because so much of consumer finance is designed around the number that's easiest to advertise, not the number that actually determines what something costs you. Leasing is a legitimate choice for the right driver β this calculator isn't here to talk you out of it, only to show you the real trade-off in dollars.
What This Lease vs Buy Calculator Does
You enter the vehicle price along with the terms of a lease offer β monthly payment, drive-off cost, lease term, and any expected mileage or wear penalty β and separately the terms of a purchase: down payment, loan rate, loan term, and what you expect the vehicle to be worth (resale or trade value) at the end of your comparison period. The calculator totals the actual cash that leaves your pocket under each path over the same number of months, and for the buy scenario it subtracts the equity you'd still hold in the vehicle β the resale value minus whatever loan balance remains. What's left is the true net cost of each option, side by side, along with an effective monthly cost for a fair comparison.
How to Use It
- Set the comparison period. This should usually match the lease term, since that's the natural point where the two paths diverge β lease-end versus keeping the car.
- Enter the full lease terms. Include the drive-off/down payment and any mileage or wear penalty you realistically expect based on your driving habits.
- Enter the full purchase terms. Use the loan rate and term you'd actually qualify for, not an optimistic guess.
- Enter an honest resale value. Check a valuation guide for the specific make, model, and mileage at the age the vehicle would be at the end of your comparison period.
- Read the net cost of each path, not just the monthly payment β the headline result already accounts for the equity a buyer keeps.
The Formula β How It's Calculated
Total lease cost = Drive-off payment + (Monthly lease payment Γ comparison period) + expected mileage/wear penalty. Total buy cost starts the same way β down payment plus monthly loan payments over the comparison period β but then subtracts equity retained, which equals the resale value at the end of the period minus the remaining loan balance at that point (calculated using standard amortization). In other words: Net Buy Cost = Down Payment + (Monthly Payment Γ Period) β (Resale Value β Remaining Loan Balance). This is the step most casual comparisons skip, and it's the one that matters most. As the Consumer Financial Protection Bureau notes in its leasing-versus-buying guidance, a lease payment is essentially a rental fee for depreciation and finance charges, while loan payments build toward outright ownership of an asset with resale value.
Why Leasing Always Looks Cheaper on the Surface
A lease payment is calculated on the depreciation the car is expected to experience during the lease term, plus a finance charge β not on the full vehicle price. That's structurally why a lease payment is almost always lower than a loan payment on the same car: you're financing the drop in value, not the whole asset. It feels like a discount, but it's really a different transaction: you're renting the use of a depreciating asset rather than buying it. At the end of the lease you hand the keys back and start again, with nothing to show for the payments beyond having driven the car.
Buying, by contrast, means every payment builds toward full ownership. Even though the monthly payment is higher, part of it is going toward equity you'll still hold at the end of the comparison period β either as a vehicle you can keep driving payment-free, or as a trade-in or private-sale value you can put toward the next car. That's the piece a payment-only comparison leaves out entirely, and it's exactly what this calculator restores.
Mileage Caps, Wear Charges, and the Fine Print
Lease contracts typically cap annual mileage β commonly 10,000, 12,000, or 15,000 miles a year β and charge a per-mile penalty, often 15-30 cents a mile, for anything over that at lease-end. They also allow the leasing company to charge for excess wear and tear: scuffed wheels, worn tires, interior stains, or dents outside "normal wear" guidelines. Both of these can add hundreds or even thousands of dollars to the true cost of a lease that looked cheap on the monthly statement. This calculator's mileage/wear penalty field exists specifically so you don't compare an idealized lease cost against a realistic buying cost β put in a genuine estimate based on how you actually drive.
Buying carries its own version of hidden cost in the form of depreciation risk: if the vehicle is worth less than expected at resale, or if it needs unexpected repairs outside of any lease-covered warranty period, the "equity" side of the equation can shrink. Being honest about your resale estimate, and factoring likely maintenance into your decision, keeps the comparison fair in both directions.
When Leasing Actually Wins
Leasing can be the genuinely better financial choice for a specific kind of driver: someone who drives well under the mileage cap every year, always wants a newer vehicle under warranty, values predictable payments with minimal maintenance risk, and doesn't want to deal with selling or trading a car every few years. For that driver, the "rental for depreciation" framing isn't a downside β it's exactly what they're paying for, and the calculator will often show a lease cost that's competitive with, or even below, the net cost of buying over the same period.
For almost everyone else β especially anyone who drives above-average miles, keeps vehicles for a long time, or wants to eventually stop having a car payment altogether β buying wins over any multi-year horizon, because the equity retained compounds every year you keep driving the same paid-off vehicle. Run the numbers over a longer comparison period, such as 60 or 72 months, and the gap in favor of buying typically widens substantially, since the lease path would require an entirely new lease and a new set of payments while the buyer's car keeps needing nothing but fuel and maintenance.
A Worked Example
Say you're weighing a $35,000 crossover. The lease offer is $450 a month for 36 months with $2,500 due at signing and no expected mileage penalty because you drive well under the cap β total lease cost comes to roughly $18,700 over three years. The buy offer is the same vehicle with $5,000 down, a 7% APR loan over 60 months, and a realistic resale value of $18,000 at the 36-month mark. Over those same three years you'd pay the down payment plus 36 months of loan payments, but you'd also still owe a chunk of the loan balance since a 60-month loan isn't paid off at month 36 β subtract the remaining balance from the resale value to get your true equity, then subtract that equity from your total cash paid out.
Run those exact numbers through the calculator and, over just those 36 months, leasing actually comes out slightly cheaper β around $2,900 less β because the 60-month loan is only partway through its term at month 36 and much of the equity hasn't built up yet; interest-heavy early payments mean the buyer hasn't caught up to the car's depreciation just yet. That's an important, honest result, not a flaw in the math: it shows leasing can genuinely win over a short comparison window when the buy loan runs longer than the window itself. Extend the comparison period to 60 months β matching the loan term β and the picture flips hard in favor of buying, since the loan is now fully paid off, there's no remaining balance to subtract, and the full resale value counts as equity. This is exactly why the comparison period you choose matters as much as the lease and loan terms themselves, and why it's worth running the numbers at both the lease-term horizon and the loan-term horizon before deciding.
Work out the exact monthly payment and total interest on the loan side of this comparison with our dedicated auto loan calculator.
Auto Loan Calculator All Free ToolsCommon Mistakes to Avoid
- Comparing lease payment to loan payment only. This ignores the equity a buyer keeps and makes leasing look better than it usually is over time.
- Guessing your annual mileage optimistically. Excess-mileage charges at lease-end are one of the most common surprise costs β use your real driving habits.
- Using an unrealistic resale value for the buy scenario. An inflated resale estimate makes buying look artificially cheaper than it really is.
- Ignoring the length of the comparison period. A short window can flatter leasing; a longer one almost always favors buying and paying off the loan.
- Forgetting drive-off costs on a lease. The first payment, taxes, and fees due at signing are real cash out the door, not a "free" start to the lease.
Related Free Tools From Arb Digital
Check what you can afford before you lease or buy with the car affordability calculator, then size the exact loan payment with the auto loan calculator. See how a bigger down payment changes either path with the down payment calculator, and if you're financing with a small down payment, check the gap insurance calculator to protect against being underwater. Browse everything in our free online tools hub.
Frequently Asked Questions
It's a tool that compares the total cost of leasing a vehicle against buying one over the same period, crediting the buyer with the equity they'd retain from the car's resale value minus any remaining loan balance.
A lease payment is based on the vehicle's expected depreciation during the lease term plus a finance charge, not the full price of the car, so it's structurally lower than a loan payment that finances the entire purchase.
In most cases, yes, because every buy payment builds equity in an asset you keep, while every lease payment ends with the car returned and no equity retained. The gap in favor of buying typically grows the longer you keep the vehicle.
Leasing tends to work best for drivers who stay well under the mileage cap, want a new vehicle every few years, prefer predictable payments and minimal maintenance risk, and don't need to build equity in a vehicle.
Most leases cap annual mileage and charge a per-mile fee for driving beyond it, plus charges for damage or wear beyond normal guidelines at lease-end. Both can add significant unplanned cost to a lease that looked inexpensive on paper.
Yes β completely free, with no sign-up, no account, and no usage limits. All calculations run locally in your browser and nothing you enter is stored or transmitted.
This tool provides general estimates for educational purposes only and is not financial, tax, legal, or medical advice. Figures are illustrative; consult a licensed professional for decisions.
