Car Lease vs Buy Calculator
Compare leasing and buying a car over the same months: lease payment built from price, residual and money factor, against a loan with the equity you keep at resale and the opportunity cost of the down payment.
Lease
Buy with a loan
| Lease monthly payment | — |
|---|---|
| Lease: total cost over the term | — |
| Loan monthly payment | — |
| Buy: cash out over the same months | — |
| Buy: equity at the end (resale − loan balance) | — |
| Buy: net cost over the term | — |
| Opportunity cost of the larger down payment | — |
| Difference | — |
In short
A lease payment = (capitalised cost − residual) ÷ months + (capitalised cost + residual) × money factor, where money factor = APR ÷ 2400. Buying costs more per month but leaves you with equity (resale value minus the loan balance); over one lease term the two are often within a few hundred of each other, and buying wins once you keep the car beyond the term.
Who this is for: Car buyers comparing a lease quote with financing the same car.
How a lease payment is built
- Depreciation charge = (capitalised cost − residual value) ÷ months. You pay only for the part of the car you use up.
- Finance (rent) charge = (capitalised cost + residual) × money factor. A money factor of 0.0025 equals 6% APR (× 2400).
- Negotiate the price, not the payment — a lower capitalised cost cuts both charges. A higher residual lowers the payment but is set by the lessor.
- Buying: the loan payment is higher, but at the end you own an asset. The fair comparison is total cash out minus the car's value at the same date, plus what the bigger down payment could have earned elsewhere.
- Taxes differ by country: in most US states sales tax is charged on lease payments, in the UK VAT is included in the price; leave the tax field at 0 unless the purchase attracts a tax the lease does not.
See also: EMI / Loan Calculator — Any Currency.
Assumptions
- Lease payment = depreciation (cap cost − residual) ÷ months + rent charge (cap cost + residual) × money factor, money factor = APR ÷ 2400; total = down + payments + fees.
- Buy: loan payment on price × (1 + tax) − down; net cost over the lease term = down + payments made − (resale value − remaining balance).
- Opportunity cost = (buy down − lease down) compounded at the investment return over the term; mileage penalties and wear charges not modelled.
Worked example
Lease: capitalised cost 33,000, residual 19,250 → 381.94 depreciation + 130.62 finance = 512.57 a month, 21,452 in total with fees. Buy: 601.14 a month; after 36 months you have paid 31,641 including the deposit, owe 13,359 and the car is worth 18,200 — net cost 21,800, plus 375 lost return on the extra down payment = 22,175. Leasing is ahead by about 720 over the term — the generous 55% residual does it. Keep the car a fourth year and buying wins, because the lease would have to start again.
Frequently asked questions
Is leasing ever cheaper than buying?
Over one term, sometimes — when the lessor's residual is higher than the real resale value, or manufacturer-subsidised money factors are low. Over several terms, buying and keeping the car almost always costs less.
What is a money factor?
The lease interest rate expressed as a decimal: multiply by 2,400 to get the APR. 0.0030 = 7.2% APR.
Why does the comparison stop at the lease term?
Because that is when the lease ends. For the buy option it reports the equity at that date so both paths are measured over the same months.
Does this apply to UAE or UK car finance?
Yes — UK PCP works like a lease with a balloon (the residual becomes the optional final payment), and UAE bank car loans are the buy case; enter the figures from the quote.
How is a lease payment calculated?
Depreciation (capitalised cost minus residual, spread over the months) plus a finance charge on the sum of the two at the money factor, plus tax where applicable.
What is a good money factor?
Below about 0.0025 (6% APR) is reasonable in 2026; manufacturer-subsidised deals can be far lower.
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