Buy vs Lease Calculator: Compare Total Cost, Break-Even, and Equity

Buying and leasing can both produce the same outcome (you get a car), but the costs behave very differently:

• Leasing often has lower monthly payments, but no equity (unless you buy it at the end).
• Buying often has higher payments, but you build equity and can sell the vehicle later.
• Mileage penalties, sales tax rules, insurance requirements, and depreciation can swing the result.

That’s why comparing only the monthly payment is misleading. What you actually want is a clear comparison of total cost over the same time period, plus a break-even point that shows when buying becomes cheaper.

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What a Buy vs Lease Calculator should include

A useful buy vs lease comparison should account for more than just the loan payment and lease payment. At a minimum, you should model:

Buying costs

• Vehicle purchase price
• Down payment
• Loan term and APR
• Sales tax
• Insurance and maintenance
• Estimated resale value (depreciation)

Leasing costs

• Lease down payment (cap cost reduction)
• Monthly lease payment
• Sales tax (varies by state; often applied to payments and/or upfront)
• Insurance and maintenance
• Excess mileage fees (estimated mileage vs included mileage)
• Lease-end buyout option (residual value), if you want to compare “lease then buy”

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How Tooladex calculates buy vs lease

The Tooladex calculator compares both options over the lease term (e.g., 36 months), so the time horizon is aligned.

Buy total cost (net cost after resale)

At the end of the horizon, it estimates resale value from an annual depreciation rate and treats selling the vehicle as a credit against total cash out:

• Down payment
• Sales tax
• Loan payments made during the horizon
• Insurance + maintenance over the horizon
• Remaining loan balance (if the loan term exceeds the horizon)
• Minus estimated resale value

Lease total cost (return at end)

Lease cost includes:

• Lease down payment
• Lease payments (plus sales tax)
• Insurance + maintenance over the horizon
• Excess mileage fees

Optional: Lease-end buyout scenario

If you enable “include buyout,” the calculator adds:

• Residual value
• Sales tax on the buyout (if applicable)

This is helpful if you want to answer: “Is leasing still cheaper if I plan to buy it at the end?”

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How to interpret the break-even timeline

The break-even chart answers a practical question:

If I could sell the car at month (m), how does my net cost of buying compare to the total cost I’ve paid to lease by month (m)?

If the buy line drops below the lease line, that month is the approximate break-even point where buying becomes the cheaper strategy (under the assumptions you entered).

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A quick example (why mileage and depreciation matter)

Two people lease the same vehicle for 36 months:

• Person A drives 10,000 miles/year on a 12,000-mile lease allowance.
• Person B drives 18,000 miles/year with a $0.25/mile penalty.

Person B’s excess mileage is:

• Excess miles per year: (18,000 - 12,000 = 6,000)
• Over 3 years: (18,000) excess miles
• Fees: (18,000 × 0.25 = 4,500)

That $4,500 can erase the “lower monthly payment” advantage quickly.

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Common mistakes when comparing buy vs lease

1) Comparing different time horizons

Comparing a 36-month lease to a 60-month loan without normalizing leads to bad conclusions. The Tooladex calculator compares both over the same horizon (the lease term) and also shows a break-even timeline.

2) Ignoring resale value

Buying can look expensive until you account for what you get back when you sell. If depreciation is lower than expected (strong resale), buying tends to look better.

3) Ignoring insurance differences

Leases often require higher coverage. If your lease insurance cost is meaningfully higher, it can narrow or eliminate the lease advantage.

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Use the Buy vs Lease Calculator

Try running three scenarios:

1. Your most realistic estimate (your best guess)
2. A high-mileage scenario (to stress-test mileage penalties)
3. A higher depreciation scenario (to stress-test resale value)

If the recommendation flips easily, that’s a signal your decision is sensitive to those assumptions (and worth validating before you sign anything).

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Related Tools

• Car Payment Estimator — Estimate a monthly payment and total interest for an auto loan
• Loan Calculator — General loan payment and amortization math
• Loan Amortization Calculator — See principal vs interest over time