Lease vs buy — 3-year cost calculator

The answer hinges on what you do at year 3

Almost every "lease vs buy" calculator hands you a single number and stops. That number hides the part that actually decides the question: whether you'd walk away at year 3 or hang onto a fully-paid car through year 5 and beyond. Two people running the same lease and the same loan can reach opposite conclusions purely because of what they do after the third year.

This calculator runs three scenarios so you can see all of them side by side:

• Lease (3 yrs) — pay monthly + acquisition + disposition fees, return the car at year 3, walk away with nothing.
• Buy + keep (3 yrs, still on loan) — monthly payments per your loan term, vehicle worth residual value at year 3, but you may still owe a balance.
• Buy + sell at year 3 — same buy scenario, but liquidate at year 3 (subtract residual from your remaining loan balance).

Sales tax is structured differently on a lease

This is the piece most shoppers miss, and it can swing the math by thousands. In most states, when you buy, the dealer charges sales tax on the full purchase price upfront and rolls it into the loan. When you lease, you pay tax month by month on just the depreciation baked into each payment. So a lease usually carries a lower lifetime tax bill, and the gap widens fast in high-tax states like California (7.25%+) and Tennessee (9.55%).

Some states (Texas, Illinois, Maryland, Georgia, Virginia) treat leasing differently — Texas charges full sales tax upfront on the lease price. Check our used car sales tax calculator for your state's structure and use the appropriate figure.

When leasing usually wins

• You want a new car every 2-3 years and would never keep one past warranty
• The lease has factory subvention (subsidized money factor + inflated residual)
• You drive under 12,000 miles/year
• Business use ≥ 50% (lease payments are 100% deductible against business income — see our Section 179 calculator for the buy comparison)

When buying usually wins

• You'd keep the car 6-10+ years (you eventually get out of the loan and drive years cost-free)
• You drive over 15,000 miles/year (lease excess-mileage fees are punishing)
• You have a long commute or kid-mileage — wear and tear hits resale either way, but lease turn-in inspections charge per dent
• You can comfortably afford a 20% down payment with 48-month financing — see our affordability calculator

Frequently asked questions