Use this free lease vs buy calculator to compare the true cost of leasing a car with buying it on a loan, including taxes, fees, resale value and the equity you keep.
Car finance · side by sideCar Lease vs Buy Calculator
Both options are compared over the lease term, so the result is fair. Insurance and maintenance are left out because they are often similar.
Our free lease vs buy calculator shows which option really costs less, so you can walk into the dealership with confidence. To begin with, enter the lease quote and the loan details for the same car. Then add the sales tax and the value the car should have at the end. After that, the calculator compares the total cost of each option over the lease term.
How the Lease vs Buy Calculator Works
In general, a fair comparison looks at the same period for both options. Therefore, the calculator measures everything over the lease term, and it counts the equity you keep when you buy.
Firstly, it adds the amount due at signing, taxed payments and end fees.
Then it adds the down payment and the loan payments over the same months.
Finally, it subtracts the car’s value minus the loan still owed.
The formulas
Lease = Signing + Payments + Fees · Buy = Down + Payments − (Car value − Loan owed)
Lease vs Buy Calculator Examples
For example, here are three common deals over 36 months, so you can see how the answer changes.
To illustrate, the lease is $450 a month with $3,000 down, while the loan is 6.5% over 60 months.
- Firstly: lease total $20,729
- Then: buying, net of equity $22,860
- Also: equity kept $4,997
Similarly, this lease is $399 a month, while the loan runs 72 months at 5.9%.
- Firstly: lease total $18,076
- Then: buying, net of equity $18,402
- Also: equity kept $1,732
In contrast, this SUV keeps 62% of its value, and the loan rate is only 3.9%.
- Firstly: lease total $24,675
- Then: buying, net of equity $16,797
- Also: equity kept $7,880
Lease vs Buy: Pros and Cons
Overall, the right choice depends on how you drive and how long you keep a car. In short, this table sums up the main differences.
| Factor | Leasing | Buying |
|---|---|---|
| Monthly payment | Usually lower | Usually higher |
| Ownership | None at the end | You own the car |
| Mileage | Limited, often 10,000–12,000 a year | Unlimited |
| Customizing | Not allowed | Allowed |
| Repairs | Mostly under warranty | Yours after the warranty |
| Long-term cost | Higher if you always lease | Lower if you keep it |
When Leasing Makes Sense
- New-car fans: for instance, leasing lets you switch every two or three years.
- Low mileage: similarly, low mileage keeps you within the lease limit.
- Business use: also, some business owners can deduct part of the lease payment.
When Buying Is Better
- Long-term owners: above all, payments stop once the loan is paid off.
- High mileage: besides, there are no mileage limits or extra-mile charges.
- Full freedom: in addition, you can sell, modify or trade the car whenever you like.
Lease vs Buy Over the Long Run
Generally, over one lease term, the two options are often close. However, the gap grows if you keep a bought car after the loan ends, because you then drive with no payment. For example, three back-to-back leases over nine years usually cost far more than buying one car and keeping it. So, if you plan to keep a car for six years or more, buying is usually the cheaper path.
Hidden Costs to Watch
Leases often include an acquisition fee, a disposition fee and charges for extra wear, as the Federal Trade Commission warns. Meanwhile, buyers pay more sales tax up front, and they face repair bills once the warranty ends. As a result, add these costs to the calculator for a fair comparison.
How to Use This Calculator
- To begin with, enter the lease payment, term, amount due at signing and end fees.
- Then enter the car price, down payment, loan rate and loan term.
- After that, set the expected resale value and your sales tax rate.
- Finally, press Compare costs to see which option is cheaper.
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Lease vs Buy Calculator FAQs
Is it cheaper to lease or buy a car?
In general, over a typical three-year term, leasing often costs a little less. However, buying usually wins if you keep the car for five years or more, because the payments stop while you still have the car.
What is a good lease payment?
For instance, a common rule is to aim for about 1% of the car’s price a month, with little or nothing down. So, a $35,000 car would lease for around $350 a month.
What is a residual value?
It is the car’s expected value at the end of the lease, set by the leasing company. In general, a higher residual value means lower monthly payments.
Can I buy my car at the end of the lease?
Yes, most leases let you buy the car for its residual value plus a purchase fee. Therefore, this can be a good deal if the car is worth more than that price.
Does leasing affect my credit?
Yes, a lease is reported like a loan, so on-time payments help your credit. On the other hand, missed payments or ending the lease early can hurt it.
What happens if I go over the miles?
In that case, you pay a charge for each extra mile, usually about 15 to 30 cents. As a result, 3,000 extra miles could add $450 to $900 at the end.
Disclaimer: Overall, this calculator gives an estimate for general information only and is not financial advice. Also, lease and loan terms vary by dealer and state, so read the contract and compare written quotes.