Lease vs buy calculator

Compare a lease returned at the end of its term with a vehicle bought using a loan over the same period. The tool estimates the lease payment from depreciation and rent charges, then compares cash outlays and ending ownership equity. Enter the costs and vehicle value from your own proposal. The starting figures combine cited official educational examples and are not market forecasts.

Starting inputs use official educational examples. Zero tax, fees, cash contributions, and extra payments mean those items are excluded until you enter them. Replace these assumptions with your own transaction amounts.

Use the same comparison period

The comparison months define the lease term and the date at which the buying option is evaluated. The buy loan may run for a shorter or longer period. If it ends first, the calculation counts only the payments required to repay it. If it continues beyond the comparison period, the remaining loan balance reduces ownership equity. Comparing lease cash outlay with the full cost of a longer loan would mix different periods.

Enter adjusted lease cost correctly

Adjusted capitalized cost is the balance after any capitalized cost reduction, not necessarily the sticker price. Put the lease cash paid at signing in the upfront field as well, because cash paid to reduce the balance is still an outlay. Exclude any first monthly payment from that upfront figure if it is already one of the monthly payments counted by this model. Refundable deposits and any refunds must be reconciled separately. The tool assumes the vehicle is returned and does not include a lease purchase option.

Separate the lease payment components

Depreciation per month is adjusted lease cost minus residual, divided by the number of comparison months. Monthly rent is the sum of adjusted cost and residual multiplied by the money factor. Add the monthly lease tax and fee amount from your proposal. Enter a dollar amount for that component rather than assuming a tax rule. The money factor is entered as a decimal, and this tool does not convert it into an advertised APR.

Account for equity when buying

Buying cash outlay includes the down payment, loan payments made within the period, and the operating costs you enter. Ending equity equals the value you provide minus the loan balance at that point. Buy net cost equals buying cash outlay minus ending equity. This subtraction recognizes the asset you still own. If the balance exceeds the value, equity is negative and net cost rises. Changing the supplied ending value can materially change the comparison.

Review what your proposal contains

Include known return charges and operating costs in the relevant fields. The tool does not predict mileage charges, wear charges, future resale value, or repair spending. It also excludes the time value of money. The Federal Reserve describes such omissions and uncertain inputs as limitations of lease-versus-buy models. Compare the written lease disclosure with this output and use the result as a starting point. A smaller net cost in this model does not decide whether the mileage limits, ownership preferences, or cash requirements suit you.

Worked example

The Federal Reserve rent-charge example supplies these inputs and the rent result. The comparison term comes from its separate 48-month lease example. Buying APR uses the CFPB educational rate. Zero additional costs are a starting assumption; enter your proposal's actual costs.

How it works

C is adjusted capitalized cost and R is the lease residual. The Federal Reserve rent-charge explanation describes the money-factor multiplication. Its payment-components explanation describes depreciation. The net-cost comparison applies ordinary cash-outlay and equity arithmetic; see the Federal Reserve discussion of model limitations. The loan side uses the amortization formula below.

P is the financed principal, r is the monthly rate, n is the number of monthly payments, and M is the regular payment. Each month, interest equals the previous balance multiplied by r. Principal repaid equals the payment minus that interest. The remaining balance falls by the principal repaid. These steps generate the schedule shown by the tool.

This is the standard fixed-payment amortization model described by CFPB auto loan amortization guidance. We use the entered APR as the annual rate for this estimate. APR can include fees; a contract payment based on a separate note interest rate can differ. Use the contract interest rate in the rate field for a closer payment match when it differs from APR. There are no balloon payments, late fees, missed payments, or daily interest adjustments in this model.