Three-year comparison

Cost or constraint

Lease: $3,000 due plus $429 × 35 = $18,015

Timing or value

Disposition and expected mileage charges: $900

Cost or constraint

Purchase: $650 × 36 plus $4,000 down = $27,400 cash paid

Timing or value

Estimated loan balance after 36 months: $17,800

Cost or constraint

Vehicle value of $22,000 creates about $4,200 equity

Keep the time period, usage and exit point consistent across both choices.

Compare the alternatives on equal terms

Normalize time and use

Use identical months and expected miles. A low-mileage lease quote is not comparable with unrestricted ownership for a high-mileage driver.

Lease cash flows

Include acquisition fee, capitalized-cost reduction, monthly payments, tax, excess wear, mileage and disposition. Large upfront reductions are at risk if the vehicle is totaled.

Purchase cash flows

Include down payment, loan payments, tax, fees, maintenance differences, remaining payoff and expected resale value.

Optionality has value

Ownership allows sale or continued use; a lease may offer a contractual purchase option. Price the option only if exercising it is plausible.

This decision belongs in The Real Cost of Auto Financing. Use Long Auto Loans: Lower Payment, Slower Equity and More Interest to check the next assumption, then test the numbers in the Lease vs. Buy Calculator.

Make both options comparable

Lease and purchase paths must cover the same vehicle use, months and mileage. Purchase equity belongs at the end of the comparison, while lease disposition and excess-use charges remain costs.

Terms to normalize across both paths

  • Cash due at signing and every scheduled payment.
  • Allowed mileage plus likely wear or disposition charges.
  • Purchase payoff and realistic net vehicle value at the same month.
  • Match vehicle, term and mileage.
  • Add every due-at-signing and end-of-lease charge.
  • Calculate purchase balance at the lease-end date.
  • Estimate resale value as a range.
  • Compare net cost and flexibility, not payment alone.

Compare both paths on the same clock

Lease vs. Buy Calculator

Normalize lease and purchase cash flows to the same months and expected use.

Where the comparison stops being fair

  • Treating a down payment as refundable equity in a lease.
  • Ignoring sales tax treatment.
  • Assuming no wear or mileage charge.
  • Subtracting full vehicle value without subtracting loan payoff.

Questions this decision usually raises

Why can lease payments be lower?

They primarily finance expected depreciation during the lease rather than the entire purchase price.

Is the lease buyout always a bargain?

No. Compare contractual buyout, taxes and fees with actual market value.

Should maintenance be included?

Include differences caused by warranty coverage, mileage and the ownership period.

Evidence behind the comparison

This page explains a calculation, not a personal recommendation. Contract rules and consumer protections vary by product and jurisdiction. Check the current agreement and official guidance before acting.