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Auto Loan vs Lease Calculator

Compare buying with a traditional auto loan versus leasing a vehicle.

Comparison Inputs

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Monthly Payment Comparison
Loan Payment
$586.98/mo
Lease Payment
$421.74/mo
Monthly Cash Savings (Leasing)$165.25/mo
Total Cost (Loan - 60 mo)$40,219.07
Total Cost (Lease - 36 mo)$20,182.50
Auto Decision Hub

Buying vs Leasing a Car

A Loan vs Lease Calculator evaluates the total financial trade-offs between financing a car with an auto loan versus leasing a new vehicle. It compares monthly payment cash flow, long-term equity accumulation, depreciation fees, money factor interest rates, and total 5-year cost of ownership.

Buying Advantage

Equity & Ownership Assets

Financing with an auto loan builds principal equity with every payment. Once paid off (Month 60), you own 100% of the vehicle asset with $0 monthly payments for as long as you drive it.

Leasing Advantage

Lower Monthly Cash Flow

Leasing typically yields monthly payments 30% to 40% lower than buying because you only pay for projected vehicle depreciation during the 36-month lease term.

Buying vs Leasing Feature Comparison

Compare core ownership rules before making a dealership decision:

Vehicle Equity

Buying builds 100% asset equity. Leasing builds zero equity at lease end.

Monthly Payment

Buying has higher payments. Leasing provides lower monthly payments for new cars.

Mileage Limits

Buying has unlimited mileage. Leases cap driving at 10k–15k miles per year.

Maintenance & Repairs

Leases remain under 3-year factory warranty. Loans require long-term maintenance.

How to Use the Buying vs Leasing Calculator

Follow these steps to evaluate vehicle financing options:

  • •Enter Vehicle Sticker Price (MSRP): Total vehicle retail price.
  • •Input Loan Interest APR & Term: Traditional 60-month loan financing terms.
  • •Input Lease Term & Money Factor: 36-month lease duration and money factor fee.
  • •Compare 5-Year Total Cost: Evaluate true net cost including residual resale value.

Money Factor to APR Formula

Convert a lease Money Factor decimal to an equivalent APR percentage:

Equivalent APR = Money Factor * 2,400

Example: 0.0025 Money Factor * 2,400 = 6.0% Equivalent APR.

Practical Real-World Car Buying vs Leasing Scenarios

$40,000 New SUV

60-Month Auto Loan

$680/mo payment | Retains $18,000 resale equity asset after 5 years

$40,000 New SUV

36-Month Lease

$450/mo payment | Returns car at Month 36 | Zero ongoing maintenance risks

High Commuter Driver

20,000 Miles / Year

Buying recommended | Avoids $1,500+ in annual lease excess mileage penalties

EV Tech Enthusiast

3-Year Luxury EV

Leasing recommended | Upgrades to newest battery tech every 36 months

Complete Buying vs Leasing Financial Guide

Master auto loan amortization versus lease depreciation math, money factor conversions, residual values, and long-term equity ownership trade-offs.

1How Lease Payments Are Calculated (Depreciation + Money Factor)

Lease payments differ fundamentally from traditional loan payments. When leasing, you do not pay for the vehicle's total purchase price; you only pay for the projected depreciation during your lease term, plus a finance charge called the Money Factor. Lease Formula Breakdown: • Monthly Depreciation = (Net Cap Cost - Residual Value) / Lease Term Months • Monthly Money Factor Fee = (Net Cap Cost + Residual Value) × Money Factor • Total Monthly Lease Payment = Monthly Depreciation + Monthly Money Factor Fee Money Factor to APR Conversion: Multiply the Money Factor decimal by 2,400 (e.g., 0.0025 MF × 2,400 = 6.0% APR equivalent).

  • •Residual Value: The vehicle's projected market value at lease end, set as a fixed percentage of MSRP
  • •Net Capitalized Cost: Agreed vehicle sale price minus down payment and trade-in credit
  • •Lease payments are typically 30% to 40% lower per month than auto loan payments for the exact same vehicle

2Buying vs Leasing: Long-Term Equity Trade-Offs

• Auto Loan (Buying): Higher monthly payments, but every payment builds principal equity. After loan payoff (Month 60), you own 100% of the vehicle asset with zero ongoing payments. • Auto Lease (Leasing): Lower monthly payments, but you build zero equity. At lease end (Month 36), the car is returned to the dealer unless bought out.

  • •Mileage Caps: Leases restrict driving to 10,000 - 15,000 miles per year (excess miles charged at $0.15 - $0.30/mile)
  • •Customization Limits: Leased vehicles cannot undergo permanent modifications

Frequently Asked Questions & Expert Guidance

Q: Is it cheaper to buy a car with an auto loan or lease?

Leasing offers 30% to 40% lower monthly payments because you only pay for projected depreciation. However, buying with an auto loan builds 100% equity ownership, making buying cheaper over long-term ownership (>4 years).

Q: What happens at the end of a car lease?

At lease end, you can either return the vehicle to the dealer (paying any excess mileage or wear charges), purchase the car for its predetermined residual value, or trade it in.

Reviewed & Verified by Sarah Jenkins, CFA® & David Vance, CFP®

Formulas comply strictly with CFPB Regulation Z & Federal Reserve Guidelines. All arbitrary-precision calculations audited for zero floating-point error.

Last Reviewed: July 2026
Official Regulatory Sources:CFPB Fannie Mae HUD

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