Is it better to pay cash, finance, or lease a car?

Future-value all three to the same horizon: cash costs the price grown at your investment return minus the resale value; financing costs the payments grown the same way; leasing costs every payment with nothing held at the end. Financing beats cash when the APR is below your honest investment return; leasing usually loses unless a business deducts it.

What credit score APR makes financing better than cash?

It isn't the score — it's the spread. When the loan APR sits below what your money would honestly earn invested, financing wins; above it, cash does. At 2026-typical 6–9% car APRs against a 6% market assumption, cash usually wins quietly.

How do I compare a lease to buying?

Convert the lease to a loan: money factor × 2400 gives the hidden APR; add acquisition and disposition fees into the payments; then compare total future-valued cost against buying with the same-term resale value credited. The lease's missing residual is the whole story.

Cash, Finance or Lease Calculator — End-of-Term Wealth, Not Monthly Payments

Price of the asset, all-in

Finance APR

Lease payment, same asset

$/mo

Term

Add what applies to you:

Advanced settings

Value at end of term

% of price

Return if invested instead

%/yr

The loan, opened up

Three doors, one table

Where the doors swap places

The true cost of each door at every investment return. Crossings are where the advice changes; the dot column is your assumption. Hover to explore.

What each door asks of you

Working the doors

How we calculate

What is included

All three doors are future-valued to the same month at your market return, so they compare honestly. Cash: the price, grown — minus the residual you still hold. Finance: the down payment grown, plus every payment grown from the month it left, minus the same residual. Lease: every lease payment grown — and nothing at the end, because nothing is what you hold. The verdict names the cheapest door and calls margins under 3% of the price a line-ball.

What is estimated or left out

One residual serves the cash and finance doors — if you’d sell privately versus trade in, the gap moves the answer. Lease-end fees, mileage overages ($0.15–0.30 a mile past the cap), wear charges, and insurance differences are outside the model, and they all lean against the lease. Business use flips the table: deductible lease payments can beat both other doors after tax — that’s an accountant conversation worth its fee.

The formula, in plain words

i = return/12   j = APR/12   m = term
FV(lump)   = lump × (1+i)^m
FV(stream) = pmt × ((1+i)^m − 1) / i
loan pmt   = L×j / (1 − (1+j)^−m),   L = price × (1 − down)
cash    = FV(price) − residual
finance = FV(down) + FV(payments) − residual
lease   = FV(lease payments)

Common questions

Is leasing always the worst deal?: Usually, for a keep-it-long buyer — you rent the steepest years of depreciation and hold nothing at the end. It flips when the residual the leasing company bet on is too optimistic (their loss, your gain), when a business deducts the payments, or when you genuinely swap cars every three years anyway and value the warranty umbrella.
Should I pay cash for a car if I have the money?: Compare the APR with what the money would honestly earn. At a 6.9% loan against a 6% expected return, cash wins quietly — a guaranteed 6.9% is on offer. Flip the numbers (2.9% promo APR, 6% return) and financing wins. The chart above shows your exact crossing; honesty about whether the cash would really be invested does the rest.
What’s the money factor on a lease?: The lease’s interest rate in costume: money factor × 2400 ≈ APR. A 0.0032 factor is a 7.7% loan wearing sunglasses. Dealers quote payments, not factors — ask for the factor, the residual, and the capitalized cost separately, and the lease becomes a loan you can actually compare.