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  3. Lease vs Buy Car Calculator

lease vs buy calculator

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How to use Credit Karma’s lease vs. buy car calculator

Trying to decide whether to lease or buy a new car? Leasing a vehicle is essentially renting a car for a set period of time. Buying a car means you own it outright after paying off your loan.

To help decide which option may be best for you, our lease vs. buy car calculator can help you run the numbers and see which might make better financial sense for your situation.

You’ll need the below information to get a result. Any fees or other factors not explicitly requested, such as a prepayment penalty, may not be included in the calculator or the calculator’s results. Take note that the results from the calculator are an estimate and are only as accurate as the inputs you put into the calculator. Changes in the provided inputs could result in a different outcome.


MSRP stands for the manufacturer’s suggested retail price. This is the price manufacturers suggest a dealership should ask for a car. Car dealerships may use this as a starting point for negotiations when selling or leasing a vehicle.

Sales tax rate

You’re probably used to paying sales tax on items when you buy them, including when you buy a car. But you may have to pay sales taxes when you lease a car as well. Sales tax laws vary by state, so check with the agency responsible for your state’s sales tax to see how sales tax may affect a car lease or purchase in your state.

Negotiated sales price

While salespeople may start the lease price at MSRP, you can negotiate the price of the vehicle used for lease calculations. The negotiated sales price determines the cost of the lease and how it affects your finances. The lower the negotiated sales price, the more you’ll save if all else is equal.

Value of your trade-in vehicle (if applicable)

You may be able to trade in a vehicle as part of a lease or sale transaction. The value the dealership gives you for the trade-in may reduce the total amount you’ll owe over the lease term or the price of the vehicle you’re purchasing.

Cash down payment or cash rebate

Cash down payments and cash rebates can lower the overall cost of your lease or car purchase.

A down payment is cash you pay when the transaction takes place, and it’s put toward the overall cost of the vehicle. Making a down payment means you’ll have less cost spread out over the life of the lease — or if you’re purchasing a car, your auto loan will be smaller.

Cash rebates come from manufacturers. They lower the price of the car for leases or purchases, depending on the terms of the rebate. You don’t pay cash out of pocket for this discount.

Auto loan terms and interest rate

To compare an auto lease to an auto purchase with this calculator, you’ll need to input the number of months you’re financing the potential purchase for, called the term. The calculator then estimates your car loan interest rate.

Longer-term loans usually come with higher interest rates but smaller monthly payments, and you’ll likely pay more interest overall with a longer-term loan. The opposite is true for shorter-term loans. These often have lower interest rates and higher monthly payments. This often causes the total interest cost over the life of the loan to be lower.

Take note: The term annual percentage rate doesn’t refer to your interest rate. Instead, APR is a calculated figure representing the actual cost of borrowing money after including interest and fees.

Your preferred loan term

A loan term is the amount of time you have to pay back a loan. Generally, the longer your loan terms, the more interest you will pay over the course of the loan. Shorter-term loans generally have higher monthly payments and lower interest costs.

Estimated lease interest rate

Different lenders (leasing companies) will offer different interest rates. The stronger your credit, the more likely you’ll get a competitive rate.  

Lease money factor

A lease money factor is a number, most often given as a decimal, that is used by some lessors to determine the rent charge part of your monthly lease payment. This information is not a lease rate, and the lease money factor is often hidden from the lessee. To find your money factor, use the following formula:

Money factor = lease charge / (capitalized cost * residual value) * lease term.

Down payment for leasing a car

A down payment toward leasing a car, or a capitalized cost reduction, is an amount of money you pay in cash when the lease transaction takes place. Putting money down on a lease doesn’t lower the overall cost but will lower monthly payments. Whether you decide to make a down payment or not, the total amount you pay won’t change.

Desired lease term

The lease term is the duration of the lease contract. A typical lease has 24-, 36-, and 48-month terms.

To get the most accurate calculation, make sure to add any other lease-related fees, such as:

  • Acquisition fee — the cost to originate a lease.
  • Destination charge — the cost to deliver the car to the dealership.
  • Disposition fee (or return fee)— a charge that covers the cost to put the leased car back on the lot as a used vehicle.
  • Documentation fee — administration fee.
  • Registration fee — cost to register the vehicle.

The above fees are not an exhaustive list and may change depending on your personal situation.

Residual value (%)

Residual value is known as the value of the car at the end of the lease term after depreciation. Your leasing company determines the car’s residual value by considering factors such as perceived reliability, technological advances, gas prices and general economic conditions, among others. Residual value can be expressed as a percentage of the price. For example, if the estimated residual value percentage is 65%, the residual value of a $35,000 vehicle would be $22,750.

Should I buy or lease a car?

Deciding to buy or lease a car is a complex decision based on your personal situation. Each has benefits and drawbacks worth considering that could make one option better than the other.

Leasing a car may help you secure a lower monthly payment to help your budget. But high upfront costs, excess mileage charges and potential repair costs could hurt your wallet over the entire lease. You won’t have a car when the lease is over, either.

While leasing a car with bad credit may seem like one way to avoid higher interest rates on auto loans, that may not be the case. It may be challenging to secure a lease with bad credit. And if you do, expect to pay a higher financing cost. If your credit isn’t great, look at how much it’d cost you to purchase a vehicle — or even take over someone else’s lease. Considering these options will help you make an informed decision.

Buying a car gives you complete ownership of the vehicle once you pay off the loan. You’ll have to pay off the total price of the vehicle plus interest on the loan before you own the car outright.

When purchasing a car, you won’t have end-of-term charges for excess mileage or wear-and-tear like you would at the end of a lease. But putting significant mileage on a vehicle or not repairing it could hurt your future resale or trade-in value when you’re ready to move on to your next car. And people with bad credit may have difficulty securing a car loan or face high interest rates if they get approved.

How much does it cost to lease a car?

The cost to lease a car consists of several factors. Some of these costs are fixed based on the lease contract you agree to. Others vary based on the usage or condition of the vehicle. You may have to pay fixed upfront costs to secure the lease at signing. Over time, you must make monthly lease payments. Each of these costs should all be fairly predictable.

Other lease costs are less predictable. You’ll have to insure the vehicle, and car insurance rates may change over the life of the lease based on your risk profile. You’ll need to refuel the car based on the fuel economy and how much you drive it. If you exceed the mileage allowance in the lease, you may have to pay an excess mileage charge when you turn the vehicle in.

Other costs can pop up when you turn in your leased vehicle at the end of the lease term. If the car hasn’t been kept in acceptable condition, you may have to pay for repairs. Alternatively, you may decide to buy the vehicle at the end of the lease. This could result in a large lump sum payment or require you to take out an auto loan.