Compare the true total cost of leasing versus buying the same car over the same term.
The calculator uses the standard money factor formula for lease payments and standard loan amortization for the purchase. The buy scenario subtracts estimated resale value at term end to get a net cost - making it a true apples-to-apples comparison with the lease where you walk away with no equity.
Leasing costs less when the residual is set high by the manufacturer, when you drive under the mileage limit, or when a manufacturer-subsidized money factor is below market rates. Leasing also works well for business use when payments are fully deductible.
Buying wins long-term, especially past the loan payoff date when the car costs nothing per month. Also better for high-mileage drivers (excess mileage fees of $0.15-$0.25/mile add up fast) and anyone who wants flexibility to sell or modify the vehicle.
The total cost comparison depends on several factors beyond monthly payments. Leasing typically offers lower monthly payments but builds zero equity. At the end of a 3-year lease, you have no asset; at the end of a 5-year loan, you own a vehicle worth 40 to 60% of its original value. Leasing works best for people who drive under 12,000 to 15,000 miles per year, want a new car every 2 to 3 years, and prefer warranty coverage throughout ownership. Buying works best for people who keep cars 7+ years, drive high mileage, or want to modify their vehicle. Financially, buying and holding a reliable car for 10+ years is almost always the lowest total cost of ownership when you factor in the car's residual value and the absence of perpetual lease payments.