When Does Buying Break Even with Leasing
The break-even point is the month where your net cost of buying (total payments minus equity built) drops below your cumulative lease payments. For a typical home purchase, that happens between month 36 and month 84 depending on appreciation, interest rate, and how much you put down. For cars, the crossover usually hits around month 48–72.
Before break-even, leasing is cheaper on paper. After break-even, every month of ownership widens the gap in your favor because you're building equity while lease payments vanish. The faster the asset appreciates (homes) or the longer you hold it past loan payoff (cars), the more buying wins.
How Equity Changes the Math
Equity is the difference between what your asset is worth and what you still owe on it. When you make mortgage or loan payments, part goes to interest and part reduces your balance. Simultaneously, appreciation grows the asset's value. Both forces push your equity up over time.
A $400,000 home with 20% down starts you at $80,000 in equity. After 10 years at 3% appreciation, the home is worth $537,567. If your remaining loan balance is $238,000, your equity is roughly $300,000. That $300K offsets every dollar you spent on mortgage, taxes, insurance, and maintenance—making your net cost far lower than it appears from monthly payments alone.
Leasing builds zero equity. Every dollar you pay in rent or lease payments is gone permanently. That's the fundamental trade-off: leasing is lower friction and lower upfront cost, but you accumulate nothing.
Opportunity Cost of the Down Payment
An $80,000 down payment on a house could instead be invested in an S&P 500 index fund averaging 10% annually. Over 10 years, that $80K grows to roughly $207,000. If buying only nets you $50,000 better than leasing over the same period, the opportunity cost of the down payment erased your advantage.
This calculator shows total net costs, but you should weigh what your down payment would earn elsewhere. The higher your expected investment return and the lower the asset's appreciation rate, the stronger the case for leasing and investing the difference.
When Leasing Makes More Sense
| Scenario | Why Leasing Wins |
|---|---|
| Staying under 3–5 years | Closing costs, maintenance, and interest front-loading eat into any equity gains |
| Flat or declining market | Without appreciation, buying's biggest advantage disappears |
| High interest rates (>8%) | More of each payment goes to interest, slowing equity growth |
| Need flexibility | Job changes, relocations, or life transitions make selling expensive |
| Cars you want new every 3 years | Depreciation hits hardest in years 1–3; leasing lets someone else absorb it |
When Buying Makes More Sense
Buy when you plan to hold for 7+ years, can comfortably afford the down payment without draining your emergency fund, and the local market is appreciating at 2–4% annually. For homes, the tax deduction on mortgage interest (if you itemize) and the $250K/$500K capital gains exclusion on primary residences add further advantages not captured in raw cost comparisons.
For cars, buying wins if you drive 15,000+ miles per year (lease mileage caps cost $0.15–$0.30 per excess mile), plan to keep the vehicle 6+ years, or prefer modifying your car. A paid-off vehicle that runs for 3–5 more years is essentially free transportation aside from insurance and maintenance.
Hidden Costs This Calculator Covers
Property tax and insurance are the costs most people forget when comparing monthly mortgage to monthly lease. A 1.2% property tax rate on a $400,000 home adds $400/month. Homeowner's insurance adds another $150–$250/month. Maintenance at 1% of home value adds $333/month. These three items alone can total $900/month on top of your mortgage payment.
For cars, factor in insurance differences (comprehensive coverage is required for leased vehicles), maintenance (usually lower on leases since the vehicle is under warranty), and end-of-lease charges for excess wear and mileage.
To model your monthly mortgage payments in detail, use the mortgage calculator. For a broader comparison of renting versus buying a home with roommate cost sharing, try the rent vs buy calculator.