Lease versus buy
Two structures, side by side, with what each one leaves you holding at the horizon you choose.
The calculator
Over 36 months
Lease
$582 a month
Buy
$1,299 a month
Leasing costs $24,188 and you hand the car back. Buying costs $49,750 and you keep a car worth about $25,793.
Lease
What you pay, $24,188
What you hold
You hold nothing
Buy
What you pay, $49,750
What you hold
A car worth about $25,793, nothing owed
Due at signing: lease $3,829, buy $3,000.
Lease: the down payment, the tax on it and the first month.
Complimentary, 15 minutes. Your numbers come with the booking.
Representation covers purchases and leases from California dealers.
This page does not name a cheaper option
The two columns answer different questions. One is what it costs to use the vehicle for 36 months. The other is what it costs to own it, and what you are holding when the horizon arrives. Which one suits you turns on how long you keep vehicles, how far you drive and what you want at the end, and none of those is arithmetic.
Your numbers
Both structures start from the same negotiated price.
The lease's term, and the moment both sides are read.
Sticker, before any discount. The residual is a share of this, not of what you negotiate.
Next calculator: What will it cost out the door?
Every figure
| Lease | Buy | |
|---|---|---|
| Monthly payment | $581.69 | $1,298.61 |
| Due at signingLease: the down payment, the tax on it and the first month | $3,829.19 | $3,000.00 |
| Paid over 36 monthsLease: due at signing and 35 more payments | $24,188.34 | $49,749.96 |
| At 36 months you hold | Nothing owned | A vehicle worth about $25,793 |
| Loan balance owed then | None | Nothing owed |
| Estimated equity then | None | $25,793 |
Both columns are read at month 36, where the loan also ends.
A lease is taxed on each monthly payment as it is made, and on a cap cost reduction once, at signing. CDTFA Regulation 1660. A purchase is taxed once, on the price, at signing. On a $42,000 vehicle at 8.25% that is $3,465 on day one against $44 a month on the lease, plus $247.50 at signing on the $3,000 down payment. The gap between the two widens as the vehicle gets more expensive, which is why the structures diverge most at the top of the market.
Acquisition and disposition charges, and anything owed for mileage over the allowance or for wear beyond the contract. Each varies by lender and by contract, so none of them is estimated here. The purchase side carries no registration charges either. Those are on the out-the-door page, where they are itemized against the statute that sets them.
How this is calculated
A lease payment is two charges. Depreciation is the capitalized cost less the residual, spread over the term. The rent charge is the money factor applied to the sum of the capitalized cost and the residual. California taxes the total of the two, month by month. A cap cost reduction is taxed once, at signing.
A purchase is taxed once, on the price, at signing. That single difference is why the gap between the two widens as the vehicle gets more expensive, and it is the reason a lease and a loan on the same car are not the same tax event.
The end of the term is where the two stop being comparable. A lease ends with nothing owned. A loan held the same number of months ends with a vehicle worth something and possibly a balance against it.
This page stops there. Which structure suits a given buyer turns on how long they keep vehicles, how many miles they drive and what they want at the end, and none of those is arithmetic.
A worked example
A $45,000 vehicle negotiated to $42,000, over 36 months, taxed at 8.25%
- MSRP
- $45,000
- Negotiated price
- $42,000
- Lease: residual 58% of MSRP, factor .00275, $3,000 down
- $582 a month, taxed monthly
- Lease, due at signing
- $3,829, the down payment, the tax on it and the first month
- Lease at the end of 36 months
- Nothing owned
- Purchase: 6.35% over 36 months, $3,000 down
- $1,299 a month, taxed once at signing
- Purchase at the end of 36 months
- A vehicle worth about $25,800, nothing owed
The two columns answer different questions. One is what it costs to use the car for three years. The other is what it costs to own it.
What this assumes
- Both sides start from the same negotiated vehicle price. The lease residual is a percentage of MSRP, which the lender sets and negotiating does not move.
- A California lease is taxed on each monthly payment and on a cap cost reduction paid at signing, which the state treats as rent paid in advance. A purchase is taxed once, on the price. CDTFA Regulation 1660.
- The lease side excludes acquisition, disposition and any mileage charge, because those vary by lender and by contract.
- The purchase side carries no registration charges. Use the out-the-door calculator for those.
- The end-of-term value is a stated assumption drawn forward, not an appraisal.
- This page does not name a cheaper option. The two are not the same transaction and what you hold at the end differs.
Where these figures come from
California taxes a lease on each monthly payment and on a cap cost reduction at signing, and a purchase once on the price. CDTFA Regulation 1660. Every other figure here is arithmetic over the terms you enter, so nothing on this page is transcribed from a schedule.
Reviewed by CarOracle, a California-licensed auto dealer with an auto broker’s endorsement, license #43082.
Every figure on this page is an estimate, not a quote. A lender, a dealer and the DMV each set their own, and only a signed contract settles what you pay.
Run your own numbers with us
Bring the vehicle you are considering and we will tell you what the market is doing on it in California this month, and what the structure should look like.
Complimentary, 15 minutes. Your numbers come with the booking.