Lease vs Buy Car Calculator
Should you lease or buy your next car? Enter the purchase price, loan terms, and lease payment to compare the total cost of each option side by side.
Understanding the True Cost of Each Option
When comparing lease vs. buy, look beyond monthly payments. Buying builds equity; at the end of a 60-month loan, you own an asset worth thousands. Leasing builds no equity; at the end of 36 months, you have nothing and must lease or buy another car.
This calculator estimates net cost by subtracting the car's estimated value from total payments. If you pay $30,000 over five years to buy a car worth $15,000, your net cost is $15,000. If you pay $15,000 to lease for three years with no equity, your net cost is $15,000. The comparison reveals which option delivers better long-term value.
Depreciation plays a huge role. Cars lose 15-20% of value annually in the first few years, then slow to 10-15% later. Leasing shifts this risk to the leasing company. Buying means you absorb depreciation but gain the residual value when you sell or trade.
When Leasing Makes Financial Sense
If you upgrade cars every 3-4 years anyway, leasing can cost less than the buy-trade cycle. Buying new, trading after three years, and buying new again means you eat the steepest depreciation twice. Leasing locks in the depreciation upfront and often has lower payments.
Business owners who can deduct lease payments as expenses may benefit from leasing. The IRS allows deducting lease payments (prorated for business use), which can offset the higher long-term cost. Check with a tax advisor to see if this applies to you.
Leasing also suits people who want the latest safety tech, fuel efficiency, and features without the hassle of selling or trading. If driving a new car every few years is a priority and you accept never building equity, leasing aligns with that preference.
When Buying Makes Financial Sense
Buying wins if you keep cars longer than the loan term. A five-year loan followed by five payment-free years means 10 years of use with half the time payment-free. Leasing means perpetual payments for perpetual use, which costs more over a decade.
High-mileage drivers save by buying. Leases limit you to 10,000-15,000 miles/year; exceeding that costs $0.15-$0.30 per mile. Someone driving 20,000 miles/year could pay $1,500-$3,000 in overage fees, negating the lower payment. Ownership has no mileage penalties.
If you want freedom to modify, sell, or trade the car anytime, buying is the only option. Lease agreements prohibit modifications and charge penalties for early termination. Ownership gives you complete control over the vehicle without restrictions.
Frequently Asked Questions
Is it cheaper to lease or buy a car?
Over the short term (3-4 years), leasing often has lower monthly payments. Over the long term (7-10 years), buying is almost always cheaper because you eventually own the car and have years without payments. The right choice depends on how long you keep vehicles.
What are the main advantages of leasing?
Lower monthly payments, driving a new car every few years, warranty coverage for the entire lease, no trade-in hassles, and potential tax benefits for business use. Leasing suits people who value new cars and predictable costs over equity.
What are the main advantages of buying?
You build equity, can sell or trade the car anytime, have no mileage limits, can modify the vehicle, and eventually own it outright. Buying suits people who drive a lot, keep cars long-term, or want to maximize value.
What happens if I exceed mileage limits on a lease?
You pay a per-mile fee, typically $0.15-$0.30 per mile over the limit. Exceeding 5,000 miles can cost $750-$1,500. If you drive more than 12,000-15,000 miles per year, buying is usually better financially.
Can I buy the car at the end of the lease?
Yes, most leases include a buyout option at the predetermined residual value. If the car is worth more than the residual (rare), buying it is a good deal. If it's worth less, return it and let the leasing company absorb the loss.