Lease vs Buy Calculator
Compare the total cost of leasing versus buying a vehicle over 3-5 years. See which option costs less based on your situation and driving habits.
Results
Visualization
How It Works
This calculator compares the total cost of leasing versus buying a vehicle over a 3-5 year period, accounting for monthly payments, down payments, interest rates, and depreciation. It helps you determine which option—lease or buy—costs less based on your specific financial situation, driving habits, and vehicle choice.
The Formula
Variables
- MSRP — Manufacturer's Suggested Retail Price — the original sticker price of the vehicle before any discounts or negotiation
- Monthly Lease Payment — Fixed monthly cost to lease the vehicle; typically includes depreciation, interest, and vehicle use
- Buy Loan Rate (%) — The annual interest rate on your auto loan; affects how much total interest you'll pay over the loan term
- Residual Value — Estimated market value of the vehicle at the end of the ownership period; higher residual value reduces your net cost of ownership
- Loan Term (months) — The total duration of your car loan (e.g., 60 months = 5 years); longer terms mean lower monthly payments but more total interest
- Down Payment — Cash you pay upfront when buying or leasing; reduces the amount you need to finance and lowers monthly payments
Worked Example
Let's say you're looking at a $30,000 vehicle. For leasing, the dealer quotes $350/month with a $2,000 down payment and a 36-month lease. For buying, you have a $5,000 down payment, 5.5% loan rate over 60 months, and the vehicle is expected to be worth $15,000 after 5 years. Lease total: ($350 × 60) + $2,000 = $23,000 before maintenance. Buy total: $5,000 down + monthly payments of roughly $565 (using an auto loan calculator) = $5,000 + $33,900 = $38,900, minus the $15,000 residual value = $23,900 net cost. Add maintenance (leases typically cover this; buying doesn't), and the lease looks comparable or slightly cheaper, though actual results depend on your specific numbers, mileage, and insurance costs.
Practical Tips
- Account for mileage limits on leases—most allow 10,000-15,000 miles/year. Excess mileage fees ($0.15-$0.30 per mile) can add thousands to your lease cost if you drive more than the cap.
- Include maintenance and repair costs in your total. Leases typically include warranty coverage and maintenance, while buying leaves you responsible for repairs after the warranty expires—a potentially significant hidden cost.
- Consider your down payment carefully. A larger down payment reduces monthly payments on both leases and loans, but for a lease, that cash is gone; for a purchase, it builds equity in an asset you own.
- Factor in insurance costs, which are usually higher for leased vehicles (lessors require comprehensive/collision coverage). Compare quotes for both the lease and purchase scenarios.
- Don't ignore residual value forecasts—they're critical to the buy calculation. Use industry resources like Kelley Blue Book or Edmunds to estimate realistic residual values, especially for depreciating luxury or specialty vehicles.
Frequently Asked Questions
What does it mean to have a 'better option' in the calculator, and how is it determined?
The calculator compares your total out-of-pocket cost for leasing versus buying over the same time period. The better option is whichever costs you less money in total. This includes the down payment, all monthly payments, interest (if buying), maintenance, insurance, registration, and subtracts any residual value if you're buying. The option with the lower total cost is financially superior for your situation.
Should I lease or buy if I like to drive a new car every few years?
If you prefer driving new vehicles with the latest technology and want to avoid major repairs, leasing typically works better financially. You'll have a warranty covering most maintenance, predictable monthly costs, and can switch to a new car every 2-4 years. Buying is better only if you keep vehicles for 7+ years, as depreciation happens fastest in the first few years.
How does driving more miles affect the lease versus buy decision?
High mileage strongly favors buying. Lease mileage allowances are typically 10,000-15,000 miles/year, and overage charges ($0.15-$0.30 per mile) can be expensive. If you drive 20,000+ miles annually, buying almost always costs less because you own the car and face no mileage penalties, though higher wear-and-tear is your responsibility.
Does the interest rate (loan rate) significantly change whether I should lease or buy?
Yes, significantly. Lower interest rates (under 4%) make buying more attractive because you pay less total interest over the loan term. Higher rates (above 6-7%) can shift the advantage toward leasing, where you're not borrowing money. If you have poor credit or can only qualify for high rates, the calculator will likely recommend leasing.
What happens if I want to buy the leased vehicle at the end of the lease?
Most leases include a purchase option at a predetermined residual value. If you're considering this, add that residual value cost to your total lease cost in the comparison. However, if the car's market value is lower than the buyout price, you're paying more than fair market value—in that case, it's better to lease a different vehicle or buy used.
Sources
- Federal Reserve: Auto Loan Information and Rates
- Kelley Blue Book: Lease vs. Buy Calculator
- Edmunds: Total Cost of Ownership Calculator