Lease vs Buy: A 36-Month Cost Worksheet

Buy when you expect to keep the car for many years or need flexible mileage. Consider leasing when you want a predictable three-year replacement cycle and can stay within the contract’s mileage and use rules. Compare total cost over the same period before choosing the smaller monthly payment.

This 36-month worksheet uses a hypothetical vehicle and financing terms. Replace the inputs with written offers. In the worked example, buying saves $604.50 if the car sells for $21,000 after three years, but requires about $216.54 more each month in loan payments.

Gather comparable inputs

The Consumer Financial Protection Bureau explains that lease payments cover depreciation and rent charges rather than paying toward ownership. A purchase loan pays down an amount borrowed, leaving you with the vehicle and any remaining debt.

For each option, collect the negotiated price, upfront cash, scheduled payments, taxes, fees and expected end-of-period obligations. For a lease, also record the mileage allowance, excess-mile rate, wear standards and any purchase option.

Our example uses a 36-month comparison period:

Input	Lease	Purchase
Agreed vehicle price	$33,500	$33,500
Cash reducing the financed or capitalized amount	$2,000	$2,000
Adjusted capitalized cost or loan principal	$31,500	$31,500
Contract term	36 months	60 months
Financing assumption	Money factor 0.00125	5.5% annual interest, with no loan fees
Lease residual	$19,950	Not applicable
Assumed resale value after 36 months	Not used when returned	$21,000
Separately paid acquisition fee	$650	None in this example
End-of-lease return fee	$395	None in this example

Taxes, registration, insurance, energy, maintenance, selling expenses and the time value of money are excluded initially so the financing comparison is visible. Add the actual amounts for both choices before using it to make a purchase.

Calculate the lease payment and total

In this simplified money-factor calculation:

Monthly depreciation = (adjusted capitalized cost − residual) ÷ lease months.

Monthly rent charge = (adjusted capitalized cost + residual) × money factor.

Using the example:

Depreciation: ($31,500 − $19,950) ÷ 36 = $320.8333.
Rent charge: ($31,500 + $19,950) × 0.00125 = $64.3125.
Base payment: approximately $385.15 monthly.
Total of 36 base payments, using unrounded values: $13,865.25.
Total including $2,000 capitalized cost reduction, $650 acquisition fee and $395 return fee: $16,910.25.

The Federal Reserve’s lease FAQ explains that rent charges are similar to financing charges, but a lease rate is not a standardized measure of total lease cost. Compare the disclosed dollar charges rather than treating a money-factor shortcut as a complete APR comparison.

This example pays the acquisition fee separately. If an actual offer finances it within the capitalized cost, recalculate the payment and do not also count it as a separate cash payment.

Count the first payment only once

“Due at signing” can include the first monthly payment, a capitalized cost reduction, fees and a refundable deposit. These items have different roles.

For the example, $2,000 plus $650 plus the first $385.15 payment means approximately $3,035.15 due initially, before excluded items. There would then be 35 remaining monthly payments, not 36 additional payments.

A refundable security deposit is money tied up during the lease. Count it in your cash requirement, then credit its expected refund when calculating net cost. Do not assume a capitalized cost reduction is refundable; the Federal Reserve distinguishes it from a security deposit.

Compare the total due at signing, all remaining installments, and the return charges. Check the mileage allowance beside that total so an attractive advertised payment can be evaluated against the driving you expect.

Calculate the purchase at month 36

For the hypothetical $31,500 loan at 5.5% with 60 equal monthly payments, the standard amortization formula produces approximately $601.69 per month.

Using unrounded payments:

Purchase calculation at month 36	Amount
Down payment	$2,000.00
First 36 loan payments	$21,660.72
Remaining loan balance	$13,645.03
Assumed sale proceeds	−$21,000.00
Net purchase cost for the period	$16,305.75

The formula is:

Down payment + payments made + remaining loan payoff − sale proceeds.

The assumed $21,000 sale leaves $7,354.97 in equity after the loan payoff. Subtract that equity from the down payment and installments already paid to reach the same $16,305.75 net purchase cost.

Amounts are rounded for display after calculation. Actual cent-rounded installments and daily interest can produce slightly different balances. Obtain a payoff quote for the planned sale date.

The CFPB’s loan disclosure guide explains amount financed, APR, finance charge and total payments. APR can differ from the interest rate when fees apply; this example assumes no such fees.

Test the resale assumption

In the base example, buying costs approximately $604.50 less over 36 months, despite the higher monthly payment. That conclusion depends heavily on the assumed sale proceeds.

Hypothetical resale value after 36 months	Purchase cost	Comparison with $16,910.25 lease cost
$18,000	$19,305.75	Lease lower by $2,395.50
$21,000	$16,305.75	Purchase lower by $604.50
$24,000	$13,305.75	Purchase lower by $3,604.50

The purchase breaks even with this lease at $20,395.50 in sale proceeds, before the excluded costs. Compare conservative and optimistic resale estimates with that threshold; below it, this lease is cheaper, while above it, buying is cheaper.

For a standard closed-end lease returned at maturity, the Federal Reserve explains that a market-value shortfall against the residual generally is not your responsibility when it is unrelated to excess mileage or wear. Those contractual charges still matter. Closed-end vehicle return guidance

Add mileage and operating costs

Suppose the lease permits 36,000 total miles and you expect to drive 45,000. At a hypothetical $0.25 per excess mile, the additional charge is $2,250. The example lease cost becomes $19,160.25 before other exclusions.

Request a quote with the mileage allowance you actually need. Compare its entire cost with the lower-mileage offer plus expected excess charges. Buying avoids a contractual lease mileage charge, but additional mileage may reduce resale value and increase maintenance needs.

Add actual insurance quotes, registration and tax treatment to both options. For example, if the lease’s required coverage costs $20 more monthly than your purchase comparison, that adds $720 over 36 months. Use matched coverage when possible so you understand whether a price difference reflects the financing arrangement or a different insurance choice.

For ownership beyond the loan term, keep insurance, maintenance, repairs, and fuel in the budget while removing the loan payment. Those later years can make buying more attractive when the vehicle continues to meet your needs.

Account for flexibility and the exit plan

Choose the lease when the term and mileage match your plans and its total cost is competitive. Choose the purchase for a longer holding period or flexible use, allowing for resale value and any remaining loan payoff when you eventually sell.

Check early-termination charges and the purchase option before signing. The federal disclosure requirements require disclosure of whether an option exists and its price or calculation method. Include the contractual exit cost in any plan to change vehicles early.

For a six-year comparison, model the second lease separately or extend the purchase calculation through year six, with repairs and resale value included. Do not assume the next lease repeats today’s offer.

For this example, buying has a modest cost advantage at the middle resale assumption; leasing wins if sale proceeds fall below the $20,395.50 threshold. Use your cash-flow limit, expected mileage, and holding period to choose between those outcomes. Our new, used and lease guide gives the broader purchase framework.