Car Loan vs Lease
Compare the monthly payment and total cost of buying (loan) versus leasing a vehicle.
Buy (Loan)
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Total Payments--
Total Interest--
Lease
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Total Payments--
Finance Charges--
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About This Calculator
This tool compares two common ways to finance a vehicle. A loan lets you own the car outright after paying it off — monthly payments are higher but you build equity. A lease is essentially renting the car for a fixed term — payments are lower but you don't own it at the end. The money factor is the lease equivalent of an interest rate; to convert APR to money factor, divide by 2400. The residual value is the car's projected worth at lease end, expressed as a percentage of MSRP.
FAQ
What is a money factor?
The money factor is the lease equivalent of an interest rate. To convert an APR to a money factor, divide by 2,400. For example, 6% APR = 0.0025 money factor. A lower money factor means lower finance charges on your lease.
What is residual value?
Residual value is the estimated worth of the vehicle at the end of the lease, expressed as a percentage of MSRP. A higher residual (e.g. 60%) means lower monthly payments because you're financing less depreciation. Luxury brands and popular models tend to have higher residuals.
Is leasing or buying cheaper?
Leasing typically has lower monthly payments, but you never build equity. Buying costs more monthly but you own the car after the loan is paid off. If you keep cars for 5+ years, buying usually saves money long-term. If you prefer a new car every 2-3 years, leasing may be more cost-effective.
How is the loan payment calculated?
The standard amortization formula is used: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (APR/12/100), and n is the number of months.