Defaults reviewed: June 2026
The question is rarely “lease or buy, yes or no.” The question is usually “which one leaves me wealthier in five years, and does the answer depend on how long I’d actually keep the car?” Almost every calculator you can find online answers the wrong question. They compare monthly payments. The right comparison is wealth-over-time — what you have at the end of a chosen holding period, with everything honestly accounted for.
This calculator does that. The math is real and the assumptions are visible. Below is a complete explanation of how it works, what it includes, what it leaves out, and why.
What incumbents get wrong
Walk into a dealership and the question becomes “what monthly payment can you afford?” That framing is not neutral. It hides the comparison you actually need to make.
A lease almost always has a lower monthly payment than financing the same car. So if you’re comparing payments, leasing looks better. But the lower payment exists because at the end of the lease you own nothing. The buyer ends the same period owning a car that’s worth something — even after depreciation, even at trade-in value. That “something” is real wealth the leaser doesn’t have.
The payment comparison erases this. The wealth comparison doesn’t.
But the wealth comparison cuts the other way too. If you’re a leaser who pockets the monthly difference and invests it, the lease can come out ahead — sometimes substantially. The car-at-the-end has value, but so do seven years of compounding returns on the payment difference. Whether the buyer or leaser ends up wealthier depends on three things: how long you keep the car, what the car is worth at the end, and what you do with the money you save by leasing.
This is the math the calculator runs.
The actual question
You enter a holding period — how long you plan to keep the car if you buy, or how many years of leases you’d cycle through. The calculator runs both scenarios for that period and shows you, at the end, which one leaves you wealthier.
Then it does something most calculators don’t: it shows you the crossover. At what holding period does the answer flip? Almost every lease-vs-buy decision has a crossover year. Below it, leasing wins. Above it, buying wins. Knowing where your inputs put that line is more useful than a single yes-or-no answer for a single scenario.
The inputs we ask for, and why each one matters
Car price (separately for lease and buy). You enter the negotiated price for each scenario. These can differ, and often should. People who lease tend to lease nicer cars than they’d buy — the lower payment lets them. The calculator lets you reflect this honestly. If your lease offer is for a $45,000 car and you’d realistically buy a $35,000 one, enter both numbers. The math then compares the lifestyles you’d actually live, not two abstract versions of the same car.
Holding period. The single most important variable. A three-year leaser cycling through new cars is making a fundamentally different financial choice from a buyer keeping their car for ten years. The crossover usually lives somewhere between five and eight years; your inputs determine exactly where.
Down payment (buy) and drive-off (lease). Both have opportunity cost. The cash you put down on a car is cash you can’t invest. We track that.
Loan interest rate and term. Standard inputs. The calculator amortizes the loan honestly, so the interest paid over the loan’s life is part of the buy scenario’s cost.
Monthly lease payment. The number on the lease offer, before any quoted “savings.” This is what you’ll actually pay each month.
Expected resale value at end of holding period. This is where buyers tend to be optimistic. A typical car loses 50-60% of its value in the first five years and continues depreciating at a slower rate after. We provide a default depreciation curve based on the entered purchase price and holding period, which you can override if you have a better estimate (e.g., you know your model holds value unusually well, or you live somewhere with high mileage wear).
Annual mileage and the lease cap. If you drive more than the lease allows, you’ll pay $0.15-$0.30 per overage mile at lease end. We ask if you drive more than 12,000 miles per year as a binary question; if yes, we add a conservative overage estimate to the lease scenario.
Annual insurance (separately for buy and lease). Leases typically require higher coverage limits and gap insurance, which makes them more expensive to insure than the same car bought. Defaults are $1,400/year (buy) and $1,700/year (lease) — adjust if you have a real quote.
Investment return assumption. Default 7% nominal — the historical S&P 500 average before inflation. This applies only to the invested-savings scenario. The spent-savings scenario uses 0% by design (see below).
The inputs we don’t ask for, and why we excluded them
Fuel costs. Same car, same mileage, same fuel costs in both scenarios. Including this would add an input that cancels out of the comparison.
Annual registration and basic fees. Same in both scenarios. Excluded for the same reason.
Sales tax handling. We do account for this, but inside the existing inputs. Lease sales tax is typically baked into the monthly payment you’d enter. Buy sales tax we add to the down payment side as part of the opportunity-cost calculation. You don’t enter sales tax separately; it’s already in the numbers you’d give us.
Maintenance during the warranty period. Both scenarios have similar maintenance costs in the first three years, because both are typically under manufacturer warranty. Including a maintenance variable that affects both scenarios identically would be accuracy theater. We model maintenance only when it diverges (see next section).
The principle is consistent: include a variable only when it actually changes the answer between options. Variables that affect both scenarios identically don’t belong in a comparison calculator.
The maintenance assumption
This is the one place where the math gets a little careful, so it deserves its own section.
If you lease and replace cars every three years, your maintenance costs stay low forever — you’re always in a new car under warranty. If you buy and keep the car for eight years, your costs are low for the first three years, then start climbing as the car ages out of warranty and parts begin to fail.
We model this by applying maintenance costs to the buy scenario only in years four and beyond, escalating with car age. Default is $1,200/year starting in year four, growing roughly $200/year as the car ages. The lease scenario carries no maintenance cost in our model because the leaser, by structure, is always in a warranty-covered car.
This is the assumption that explains why the answer flips at the crossover point. For short holding periods, maintenance doesn’t matter. For long ones, it can be the deciding factor.
The two scenarios we run
This is the most important honesty in the calculator, and the one that distinguishes it from every payment-comparison tool.
Scenario A: invested savings. Leasing usually has a lower monthly payment than financing the same car. If you actually invest that monthly difference at 7% nominal, it compounds. By the end of a long holding period, that compounded difference can be substantial — sometimes large enough to outweigh the buyer’s resale value at the end.
Scenario B: spent savings. Most leasers don’t invest the difference. The lower monthly payment doesn’t show up as wealth; it shows up as more discretionary spending. In this scenario, we treat the monthly savings as gone — spent, not invested. The buyer still ends with their resale value. The leaser ends with nothing.
The calculator shows both. The honest answer for any given person depends on which scenario describes them. If you have automatic transfers set up to invest exactly the lease-vs-buy payment difference into an index fund every month for seven years, Scenario A is your real outcome. If you’d just absorb the savings into your normal spending, Scenario B is your real outcome.
We don’t tell you which one you are. You know.
The crossover point
Below the wealth-comparison numbers, the calculator shows the crossover year — the holding period at which the answer flips between your inputs. If your inputs say “leasing wins” at five years and “buying wins” at eight, the crossover is somewhere in between.
This is the calculator’s most useful output. It transforms a binary question (“should I lease or buy this car?”) into a planning question (“how long do I actually need to plan to keep this car for buying to make sense?”). If you know yourself well enough to predict your holding behavior, the crossover gives you a clean test. If you’d realistically cycle every three or four years, lease. If you’d really keep it ten, buy. If you’re not sure, the crossover tells you what counts as “long enough.”
When you’re not really comparing the same car
A subtle thing happens in the real world: people lease cars they wouldn’t buy. The lower monthly payment moves them up a tier — the Honda Civic buyer leases a BMW 3 Series for the same monthly cost. So the lease-vs-buy comparison is actually a “drive a nicer car under lease, or a less-nice car under ownership” comparison.
We don’t try to flatten this. The separate price fields for each scenario let you reflect what you’d actually do. The calculator’s answer is then about the lifestyle you’d actually live, not about the car itself. If your honest answer is “I’d lease the BMW or buy the Civic,” enter both prices that way. The math compares your real options.
This is also why a single calculator can’t give you a single answer about lease-vs-buy in general. The answer depends on which car you’d actually choose under each scenario, and that’s not a question math can answer for you.
Defaults and where they come from
| Default | Value | Source/reasoning |
|---|---|---|
| Investment return | 7% nominal | Historical S&P 500 long-run average, pre-inflation. Standard assumption across major financial calculators. |
| Annual insurance (buy) | $1,400/year | National average for full coverage on a financed mid-size vehicle, 2025-2026 data. Lower if you have older vehicle or higher deductibles. |
| Annual insurance (lease) | $1,700/year | Same coverage plus required gap insurance and higher liability limits. |
| Maintenance years 1-3 (both) | $0 modeled | Manufacturer warranty typically covers this period. Real costs exist but cancel between scenarios. |
| Maintenance year 4+ (buy only) | $1,200/year, +$200/year escalation | Industry surveys of out-of-warranty maintenance costs for vehicles aged 4-10 years. |
| Mileage overage | $0.20/mile above 12,000/year | Midpoint of typical lease overage charges ($0.15-$0.30). |
| End-of-lease disposition fee | $400 | Median of typical disposition fees from major captive lenders ($350-500). |
Every default is editable. If you have a real quote, real estimate, or local knowledge, use it.
What this calculator can’t tell you
It can’t tell you whether you’ll actually keep a car for ten years if you buy it. People predict ten and trade at five. The crossover point assumes you mean what you say about your holding period; if you don’t, the math reflects an outcome you won’t actually live.
It can’t tell you whether the lifestyle difference matters. If leasing means driving a car you actually love and buying means driving a car you tolerate, the math might say “buying is $X cheaper” and you might rationally pick leasing anyway. The car you drive is not just a financial instrument.
It can’t predict what cars will be worth in five years. The depreciation curves are estimates, not forecasts. Used car markets shift; EV adoption is changing residual values in ways that historical data doesn’t capture. The numbers are honest starting points, not certainties.
It can’t tell you if you should buy a car at all. There’s a calculator we haven’t built yet for that question — how much car you can actually afford — which sits upstream of lease-vs-buy. If your real question is “can I afford this car,” lease-vs-buy is the wrong tool. Come back when you know the price you’d actually pay; that’s when the comparison becomes useful.