When leasing actually wins
Leasing wins three specific scenarios: (1) the manufacturer is propping up the residual to move metal (common with luxury and slow-selling EVs); (2) the money factor is subsidized below market rates (often ≤ 4% APR-equivalent on certified loyalty deals); (3) you'd swap cars every 3 years anyway. Outside those, leasing has an embedded premium of 10-25% over buying-and-selling the same car at the same month.
The dealer math you're not supposed to see
Dealers quote leases as monthly payments, hiding the cap cost reduction (down payment), residual, and money factor. The same lease can be 'priced' three different ways for the same monthly payment by shuffling those three levers. Always demand the lease worksheet showing all three. If the dealer refuses, assume the MF and residual are not in your favor.
The 'always lease' trap
Wealthy households who 'always lease' luxury cars pay roughly 30-50% more in lifetime transportation cost than households that buy and keep cars 8-10 years. The convenience (always under warranty, easy turn-in) is real but expensive. If you genuinely value the flexibility, that's a lifestyle choice — but it should be priced honestly using this calculator, not framed as 'smart finance.'
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
FAQ
What's a money factor and how do I convert it?
Money factor is the lease equivalent of interest. Multiply by 2400 to approximate APR. A 0.00125 MF ≈ 3% APR. A 0.00250 MF ≈ 6% APR. Anything above 0.00300 (7.2% APR) is a bad lease deal; you can probably finance and buy for less.
Why does the lease residual matter so much?
Residual is the bank's guess of the car's value at lease end. Higher residual = lower depreciation portion of your monthly payment = lower payment. Manufacturers inflate residuals to subsidize leases (Audi, BMW, Lexus, German EVs do this constantly). When the residual exceeds true market resale, you should lease and let the bank eat the loss.
Should I put money down on a lease?
Generally no. If the car is totaled in month 1, you lose the entire cap cost reduction — insurance only owes the bank the residual, not your down payment. Roll the drive-off into the monthly payment unless you're using the down payment to qualify for a lower money-factor tier.
What about a lease buyout at the end?
If the car's market value at lease end exceeds the residual on the contract, buying it out (then optionally re-selling) captures that gap. In 2021-23 this was common for low-mileage Toyotas and Hondas where used prices exploded. In 2025 markets it's situational; check KBB private-party value vs. residual the month before lease end.
How do leases handle mileage overages?
Lease contracts limit you to typically 10k, 12k, or 15k mi/yr. Overages run $0.15-0.30/mi. If you drive 18k mi/yr on a 12k contract, that's $1,800-3,600 in overage charges at turn-in. Always lease the mileage tier you'll actually use.
Does this calculator include sales tax?
No — sales tax treatment of leases varies wildly by state. In CA and most states, you pay sales tax on each monthly payment. In TX, GA, IL (in some cases), you pay tax on the full vehicle price up front. Add 5-10% to both lease and buy totals for a comparable picture in your state.
Is opportunity cost on the down payment really material?
For typical down payment deltas of $2-5k over 3 years, it's $300-750 in foregone interest at 5%. Not huge in isolation but it does flip close calls. For luxury cars with $10-15k down delta, opportunity cost can be $1,500-2,500 over the term — material.
How does the calculator handle EV tax credits?
It doesn't directly. The federal $7,500 EV credit applies to leases (passed through by lessor) and to purchases (if you qualify). If you're comparing a leased EV with the credit baked into a lower residual or down payment vs. a cash purchase claiming the credit on your taxes, the comparison is approximately apples-to-apples; otherwise reduce the buy side's cash out by $7,500.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.