How does a future-value comparison work for cash versus lease?
Money spent at different times is not directly comparable, so the calculator moves everything to the end of the lease. On the cash side, the full price is grown at your investment return for the whole term, because that is what the money would have become if invested. The resale value, which the cash buyer keeps, is then subtracted.
On the lease side, the drive-off amount is grown for the full term, and each monthly payment is grown from the month it is paid to the end. Adding these gives the lease's cost in end-of-term dollars.
The option with the lower net cost wins, and You Save is the gap between them. In the worked example below we assume monthly compounding and lease payments at the start of each month; the calculator's exact timing convention may differ slightly, which can move results by a small amount.
g = (1 + i)^n, where i = annual return ÷ 12 Cash net cost = Price × g − Resale value Lease net cost = Drive-off × g + Σ Payment × (1 + i)^(n − k), k = 0 … n − 1
- i
- monthly investment return
- n
- lease term in months
- k
- month in which a lease payment is made (0 = signing month)
Example: $33,000 in cash or a 36-month lease at $419
Scenario: A buyer with $33,000 saved could pay cash for a car expected to be worth 52% of its price in three years, or lease it for $419 a month with $3,000 due at signing and keep the rest invested at an assumed 5% annual return.
- Growth factor(1 + 0.05 ÷ 12)^36 = 1.1614722
- Cash side$33,000 × 1.1614722 = $38,328.58; minus resale $17,160.00 = $21,168.58
- Drive-off grown$3,000 × 1.1614722 = $3,484.42
- Lease payments grown36 payments of $419, each grown to month 36 = $16,305.30
- Lease side$3,484.42 + $16,305.30 = $19,789.72
- Gap$21,168.58 − $19,789.72 = $1,378.86
At an assumed 5% return, leasing and investing comes out $1,378.86 ahead of paying cash, measured at the end of the three years.
With these figures paying cash wins if the money would earn less than about 3.19% a year, and no return above that is guaranteed.
When does this comparison fit your situation?
You have the full price saved
The comparison only makes sense if paying cash is a real option. If you would need a loan, compare leasing with buying on credit instead.
You are deciding what to do with a windfall
An inheritance or bonus raises the question of whether to spend it on a car or keep it working. This calculator puts a dollar figure on that choice.
A lease offer looks unusually cheap
Promotional leases can have low payments. Comparing them against paying cash shows whether the deal beats simply owning the car.
You want to stress-test return assumptions
Try a cautious return, like a savings account rate, and a higher one. If paying cash wins at both, the decision is fairly robust.
What can mislead a lease-or-cash decision?
Assuming a high return is certain
Investment returns vary, and a return that beats the car's costs one year may not the next. Use a rate you would realistically expect after fees.
Draining your emergency fund
Paying cash for a car can leave you with little set aside for surprises. Keep enough savings to cover emergencies whichever option you choose.
Ignoring taxes on investment gains
Gains in a taxable account are usually taxed, which lowers the effective return. The calculator does not include this, so it can flatter leasing.
Stopping the comparison at lease end
A cash buyer can keep driving the car after three years with no payment. That longer horizon often favors paying cash but is not modeled here.
Overlooking mileage and wear charges
Lease contracts charge for excess miles and damage at turn-in. Add an estimate to the lease side if you drive a lot.
What investment return does it take for leasing to win?
The return you assume is the hinge of this comparison. At a 0% return there is no opportunity cost, so the comparison collapses to plain dollars: paying cash costs the price minus resale, while leasing costs drive-off plus payments.
With the example's numbers that is $15,840.00 for cash versus $18,084.00 to lease. As the assumed return rises, the cash side's lost growth increases faster than the lease side's, and the two meet at about 3.19%. The table shows the gap narrowing and then reversing, which is why a realistic return assumption matters more than any other input here.
| Investment return | Cash net cost | Lease net cost | Gap | Lower cost |
|---|---|---|---|---|
| 0% | $15,840.00 | $18,084.00 | $2,244.00 | Pay cash |
| 2% | $17,878.86 | $18,743.61 | $864.75 | Pay cash |
| 4% | $20,039.97 | $19,433.22 | $606.75 | Lease |
| 5% | $21,168.58 | $19,789.72 | $1,378.86 | Lease |
| 7% | $23,526.54 | $20,527.08 | $2,999.46 | Lease |
| 9% | $26,025.30 | $21,298.25 | $4,727.05 | Lease |
Terms used on this page
- Compound Interest
- Compound interest is interest earned or charged on both the original principal and the interest that has already built up. Each period's interest is added to the balance, so the next period's interest is a little larger. Over long stretches, compounding makes savings grow faster and unpaid debts grow faster too.
- Residual Value
- Residual value is the estimated worth of a leased vehicle at the end of the lease, set by the leasing company when you sign. It is usually stated as a percentage of the sticker price. A higher residual means less depreciation to pay for during the lease, which lowers the monthly payment, and it is also your buyout price.
- Emergency Fund
- An emergency fund is cash set aside for unexpected costs or income loss, such as a car repair, medical bill or job gap. It is usually kept in an insured, easy-to-reach savings account. A common target is three to six months of essential expenses, though any starting amount reduces the need to borrow at high rates.
- Real Rate of Return
- The real rate of return is what your money earns after adjusting for inflation. It shows the actual growth in purchasing power rather than in dollars. A quick estimate is the nominal rate minus inflation; the exact figure is (1 + nominal) ÷ (1 + inflation) − 1, which is slightly smaller.
Lease vs. Pay Cash Calculator: common questions
What is the opportunity cost of paying cash for a car?
It is the investment growth you give up by spending the money instead of keeping it invested. On $33,000 at an assumed 5% annual return compounded monthly, that growth over three years is about $5,328.58. The calculator adds this lost growth to the cash side, then subtracts the resale value you keep.
Does leasing make sense if I can afford to pay cash?
Sometimes. Leasing can come out ahead when the car depreciates quickly, the lease has a low finance charge, and your cash would otherwise earn a strong return. If the car holds value and your cash sits in a low-yield account, paying cash usually costs less. The table on this page shows where the break-even return falls for one example, and you can find yours by testing different returns.
Why are the lease payments grown at the investment return?
Each lease payment is money that could also have been invested, so spending it costs you its future growth too. Growing each payment to the end of the term puts the lease side on the same footing as the cash side. Earlier payments grow longer than later ones. Without that step, the comparison would understate the cost of leasing, because lease money also leaves your account over time.
Should I use a savings rate or a stock market return?
Use the return you would realistically earn on this particular money. If you would keep it in savings or CDs, use that kind of rate. If you would invest it in a diversified portfolio, a higher figure may be reasonable, but remember it carries risk and is not guaranteed. Running the comparison at both a cautious and an optimistic return shows how much the decision depends on that assumption.
How does resale value affect paying cash versus leasing?
The cash buyer keeps the car, so its value at the end of the term comes back as a credit. A higher resale value lowers the cash side's net cost and favors paying cash. A car that loses value quickly favors leasing, since the lessor absorbs that loss. Mileage and condition affect resale too, so adjust the percentage if you drive more than average or keep cars in rough conditions.
Does this calculator account for taxes on investment returns?
No. It grows money at the return you enter without deducting tax. In a taxable account, gains are usually taxed, which lowers the effective return and makes leasing look less attractive. You can approximate this by entering an after-tax return. For example, if you expect 5% and would pay roughly 20% tax on gains, entering about 4% gives a closer comparison.
What if I keep the car longer than the lease term?
Then paying cash usually gains more ground, because you keep driving with no payment while a lessee would start a new lease. This calculator stops at the lease term, so it does not capture those later years. Weigh that if you typically keep cars a long time. A rough way to account for it is to raise the resale value slightly or compare over a second lease cycle by hand.
Is financing a car better than paying cash or leasing?
It can be if your loan rate is lower than the return your cash would reliably earn, but that gap is often small or negative once risk and taxes are counted. Financing also adds interest costs and a monthly obligation. Compare the loan's total interest with the growth you expect on the cash you keep.
Sources
- Compound Interest Calculator — U.S. Securities and Exchange Commission (Investor.gov). Accessed October 17, 2026.
- Compound interest (glossary) — U.S. Securities and Exchange Commission (Investor.gov). Accessed October 17, 2026.
- Auto loans — Consumer Financial Protection Bureau. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations, last checked October 17, 2026. See our methodology.