Car Lease vs. Buy Calculator

The Formula

The lease vs. buy comparison compares total lease payments to the net cost of buying after accounting for the vehicle's residual value at the end of the comparison period. The comparison is only valid over the same time horizon.

Variable Definitions

How to Use This Calculator

1. 1

   Enter the vehicle price, lease payment, and lease term.

2. 2

   Enter the buy scenario down payment and loan APR.

3. 3

   Enter an estimated annual depreciation rate (15% is typical for new vehicles).

4. 4

   The calculator compares total cost over the same time period.

5. 5

   The comparison accounts for the vehicle equity you retain if you buy, making it a true apples-to-apples comparison.

Common Applications

• Deciding whether to lease or finance a new vehicle by comparing total costs over the same time period
• Evaluating the financial trade-off between lower monthly lease payments and building equity through ownership
• Comparing long-term costs for drivers who keep vehicles many years versus those who prefer upgrading every 2-3 years

Leasing offers lower payments; buying builds ownership equity over time

Understanding the Concept

Leasing vs. buying is fundamentally a question of what you pay for what you get. Leasing means paying for only the depreciation during the lease term — you return the car at the end. Buying means paying for the full vehicle but retaining the asset. Leasing is often cheaper in the short term but more expensive over the long run if you always lease vs. driving a purchased vehicle for many years. Leasing makes financial sense when: you value always having a new car, you drive less than the mileage limit, and your lease payment is significantly below a purchase payment. Real-world example: a $40,000 car with a $450 per month lease at 36 months totals $16,200 plus $2,000 down equals $18,200. Buying the same car with $5,000 down at 6.9% APRThe total yearly cost of borrowing, including interest and fees, expressed as a percentage of the loan amount. over 60 months costs about $690 per month. Over 36 months, the buyer pays $29,840 but the car is worth about $22,000 residual, making the net cost only $7,840 — much less than the lease. However, the lease has lower monthly payments and the buyer is responsible for repairs after the warranty expires. The lease decision also depends on driving habits: if you drive 18,000 miles per year and the lease allows only 12,000, you face roughly $900 to $1,800 in excess mileage fees at the end. For business owners, lease payments can often be deducted as a business expense, which may tip the scales toward leasing.

Frequently Asked Questions

Sources & References