Lease vs Buy Calculator
To compare leasing vs buying a car, compute total cash out for each over the same horizon, then subtract the residual sale value from the buy side at term end. Buy net = down + total payments − residual sale. Whichever line ends lower wins. The chart shows the crossover precisely.
TCO Crossover — Buy vs Lease
Vehicle scenario presets
Residual % at 36 mo by vehicle class (ALG/Black Book)
| Class | 36mo | 60mo |
|---|---|---|
| Mid-size SUV (Toyota Highlander) | 62% | 50% |
| Full-size pickup (F-150) | 66% | 55% |
| Compact sedan (Civic) | 55% | 45% |
| Luxury sedan (BMW 5-series) | 50% | 38% |
| EV (Tesla Model Y) | 55% | 45% |
| Subcompact (Versa) | 50% | 40% |
| Minivan (Pacifica) | 52% | 42% |
| Sports car (Mustang) | 58% | 48% |
EV-specific tax math? See Depreciation Calculator →
Formula
buy_net = down + (M × n) − residuallease = down + (pmt × n) + acq + dispwinner = min(buy_net, lease)Worked: $42k SUV, 10% down, 6.99% × 60mo P&I $748. Buy total $48,920. 50% residual $21k → net $27,920. Lease $485 × 60 + $3k + $1k fees = $34,100. BUY wins by $6,180.
From GMAC 1919 to the IRA 2022 EV credit: the long history of car finance
In 2026, a Cincinnati family deciding between buying a Honda Pilot for $42k or leasing it for $485/month pulls up this calculator. The chart tells them within ten seconds which is cheaper over 60 months, and by how much. The right answer depends on residual value, mileage, and how long they intend to keep the car. This page reproduces the same TCO math the dealer's F&I (Finance & Insurance) manager runs internally.
General Motors Acceptance Corporation (GMAC), founded in 1919, invented modern auto financing — making the affordable purchase of cars on installment plans possible. By the 1950s, captive finance arms had become standard — Ford Motor Credit (1959), Chrysler Credit (1964), Toyota Motor Credit (1982), Honda Finance (1980). The lease, invented in the 1950s for commercial fleets, came to retail consumers in the 1970s.
The Internal Revenue Code §168 modified accelerated cost recovery system (MACRS, enacted by the Tax Reform Act of 1986) set the 5-year recovery period for vehicles — which drives the after-tax economics of business-owned cars. The IRC §168(k) bonus depreciation and §179 expensing rules let business owners deduct most or all of a vehicle purchase in year 1 (subject to Pub 463 luxury caps).
The Truth in Lending Act of 1968 (TILA, 15 U.S.C. §1601) and Reg Z require auto lenders to disclose APR, finance charge, amount financed, and total of payments. The Consumer Leasing Act of 1976 (CLA, 15 U.S.C. §1667) adds parallel disclosure for leases — gross capitalized cost, residual value, money factor, total monthly payments, and excess wear/mileage charges. Both are enforced by the CFPB in 2026.
The Servicemen's Readjustment Act of 1944 (the GI Bill) created the VA loan, but its corollary for cars — the SCRA (Servicemembers Civil Relief Act of 2003) — caps interest on existing auto loans at 6% for active-duty members and prohibits repossession without court order. Many veteran-friendly dealers extend SCRA-style terms to all veterans.
The Inflation Reduction Act of 2022 introduced the modern IRC §30D Clean Vehicle Credit ($7,500) for new EVs, with battery-content and income caps. Critically, §30D applies primarily to PURCHASES, not consumer leases. However, the IRC §45W Commercial Clean Vehicle Credit lets leasing companies claim the credit and pass the savings to the lessee — effectively making EV leases competitive with buys even without the consumer §30D.
By 2026, the NHTSA reports the average new vehicle transaction price at $48,200 and average loan term at 71 months. Edmunds' Q1 2026 lease take-rate is 20% of new vehicle sales, down from 30% pre-pandemic. CarMax, CarGurus, and TrueCar publish residual value forecasts that drive the chart on this page — pulled from ALG/Black Book and Kelley Blue Book. The lease-vs-buy math has not changed in 30 years, but the inputs (rate, residual, EV credit) shift constantly.
How to use the lease vs buy calculator
- Enter the vehicle price. Use the negotiated MSRP — same number for both lease and buy.
- Buy side. Down %, APR from credit union or captive lender, loan term, residual % from KBB/Edmunds at term end.
- Lease side. Monthly lease payment + down (cap reduction) from the dealer's lease quote. Acquisition and disposition fees auto-included.
- Pick a horizon. 36 months favors lease for newer cars; 60+ favors buy.
- Read the crossover. Blue line drops at term end by residual sale; purple line doesn't. Lower endpoint at month 60 wins.
What auto-finance pros and drivers say
“This is the cleanest TCO comparison I have seen for the lease-vs-buy question. The drop at month 60 from residual sale is what most calculators omit — and what makes the buy side look worse than it actually is. The KBB residual % approach is correct.”
“The IRC §162 / Pub 463 reference for business lease deductions is accurate. The lease inclusion amount note in FAQ #4 saves me explaining this to first-year clients. I have started linking this from my client portal.”
“The §30D vs §45W EV credit distinction in the FAQ is rarely explained correctly online — most blogs say leases get the credit, ignoring that it is via §45W. This tool actually gets it right. Excellent calculator for fleet TCO modeling.”
“I link this from my Sunday column whenever I write the "lease vs buy" piece. The high-mileage and short-commute presets exactly match the two scenarios I get most reader questions about. Mileage warning in FAQ #5 is essential — many readers miss it.”
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