Lease vs Buy Car Calculator: Which Costs Less
Is it cheaper to lease or buy a car? Enter the loan and the lease side by side to see which costs less over your time horizon once the value of the car you would own is counted. This page compares the two. To price the lease payment itself from a residual and money factor, use the car lease calculator, and for the loan alone use the car payment calculator.
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Formula
- Months in the horizon
m = years x 12 - Buy net cost =
down payment + loan payments made in m months + loan balance still owed - resale value - Resale value =
price x (1 - yearly depreciation%)^years - Lease total =
due at signing + monthly payment x m - Difference =
lease total - buy net cost; a positive number means buying is cheaper
Assumptions: one signing payment, the same monthly lease for the whole horizon, constant yearly depreciation, and the remaining loan balance is paid off at the end. Taxes, insurance, maintenance and mileage fees are excluded.
Worked example
Price 30,000, down payment 3,000, loan 6% for 60 months, depreciation 15% a year, lease 400 a month with 2,500 at signing, horizon 3 years.
- Loan = 27,000, payment = 521.99; after 36 months paid = 18,791.48, balance = 11,777.49
- Resale = 30,000 x 0.85^3 = 18,423.75
- Buy net cost = 3,000 + 18,791.48 + 11,777.49 - 18,423.75 = 15,145.23
- Lease total = 2,500 + 400 x 36 = 16,900
- Difference = 1,754.77, so buying costs less
Use this when
You have a lease quote and a loan offer for the same car and want one comparison. Longer horizons tend to favour buying, while short horizons and low lease payments favour leasing.
How it differs from nearby pages
The car lease calculator builds a lease payment from MSRP, residual value and money factor. The car payment calculator builds a loan payment. The car depreciation calculator estimates resale value alone. This page puts both options on one scale.
Common mistakes
- Comparing only monthly payments. A lease leaves you with nothing to sell, a loan does.
- Using a depreciation rate that is too optimistic for the model.
- Ignoring mileage limits and wear charges, which this model does not include.
- Choosing a horizon shorter than the time you will really keep the car.
Frequently asked questions
How does this compare leasing and buying?
Buying costs the down payment plus loan payments made, plus the loan balance you would still owe, minus what the car is worth at the end. Leasing costs the signing payment plus monthly payments. For 3 years the buy side is 3,000 + 18,791 + 11,777 - 18,424 = 15,145, against 16,900 for leasing.
Why is the resale value subtracted when buying?
When you buy, you still own an asset at the end. A 30,000 car losing 15% a year is worth 18,424 after 3 years, so the true cost of owning is lower than the cash you paid out. A lease leaves you with nothing to sell.
Does the time horizon change the answer?
Yes. Buying usually looks better the longer you keep the car, because the loan ends and depreciation slows. With the default numbers, 6 years costs 23,005 to buy against 31,300 to lease. Leasing wins mainly for short horizons or very low lease payments.
What is not included?
Taxes, insurance, maintenance, mileage and wear charges, and what you could earn by investing the cash. The model uses one signing payment and repeats the same monthly lease for the whole horizon, and a constant yearly depreciation rate. Treat the result as an estimate.
Is it cheaper to lease or buy a car over 5 years?
With the default inputs, buying has a net cost of 21,007.98 over 5 years, against 26,500 for leasing at 400 a month with 2,500 due at signing. Buying wins by 5,492.02 because the loan ends and you still own a car worth 13,311.16.
When does leasing cost less than buying?
Leasing can win when the lease payment is low or the horizon is short. With a 300 a month lease and 2,000 at signing over 3 years, leasing costs 12,800 against 15,145.23 for buying, a gap of 2,345.23 in favour of leasing.
Is it cheaper to buy over 2 years?
On the default numbers, yes. Over 2 years buying costs 11,010.85 and leasing costs 12,100, because the car you own is still worth 21,675. The answer flips if the lease payment is cheaper.