In this scenario, at the end of the 4-year evaluation period, you do not want to keep the vehicle. So, if you had purchased the vehicle you will will need to sell it, and if you leased the vehicle you will just turn it in at the end of the lease. The vehicle has a current value of $15,000, which is equal to the residual of $15,000.

Let’s assume that if you purchase the vehicle you will finance the purchase. The costs to purchase are shown in the table below. You will have a down payment of $602.48 plus 48 monthly payments of $693.40 each. We estimate that you will incur $500 in expenses when you sell the vehicle. This would include minor repairs, advertising, finder’s fees, etc. You sell the vehicle for $15,000. Your total net cost to purchase would be $19,385.68.

Total Cost to Purchase

Down Payment
48 Loan Payments @ $693.40
Less: Selling Price of Vehicle
Selling Fees
Total Cost to Purchase

The cost to lease are shown in the table below. You will have an initial lease fee of $602.48 which includes the first payment. You will have 47 additional lease payments of $404.98 for total payments of $19,636.54.

Total Cost to Lease

Initial Lease Fee
47 Lease Payments @ $404.98
Less: Interest on Invested Cash
Total Cost to Lease

If you lease, you will have $288.42 in extra cash each month. We assume that instead of spending the money, you invest it in something conservative like a money market fund and earn 3% interest. If you do this, you will earn $799.34 in interest over the 4-year period, which reduces the total cost to lease to $18,837.20.

Since you don’t want to keep the vehicle, and the value isn’t greater than the residual, you just turn in the vehicle at the end of the lease period.

The total cost to purchase is $19,385.68 and the total cost to lease is $18,837.20. When you purchase under this scenario, you are basically out the selling fees associated with getting rid of your vehicle, plus the time and hassles involved.


Under this scenario, you come ahead if you lease, basically by the cost to sell the vehicle. However, the main benefit here, is that the lessee does not have to sell the vehicle. Please remember that it can be a major pain to sell a used vehicle. One of the reasons that you leased in the first places is that you didn’t want to deal with selling the used vehicle.