Lease vs Buy: Which Is Better for You?
The lease vs buy decision is one of the most common personal finance questions for car shoppers — and the answer depends more on your driving habits, financial priorities, and how long you keep cars than it does on the monthly payment. Leasing almost always offers a lower monthly payment than buying, but that lower payment doesn't mean leasing is cheaper in total. This calculator computes the true apples-to-apples comparison by accounting for residual car value when you buy.
The key insight: when you buy a car and pay it off, you own an asset worth something. When a lease ends, you walk away with nothing (unless you exercise a purchase option). Fair comparison requires subtracting the car's value at the end of the comparison period from the total buy cost.
How This Calculator Compares Costs
- Total lease cost = Down payment + (monthly payment × term) + optional purchase price at end. If you return the car, you get no asset in return.
- Total buy cost = Down payment + all loan payments (principal + interest) over the loan term.
- Net buy cost = Total buy cost − estimated car value at the end of the lease term. This is the fair comparison figure: what buying actually cost you after netting out the asset you own.
The depreciation rate adjusts the car's estimated value at the end of the lease period. New cars typically depreciate 15–20% per year in the first few years; used cars depreciate 10–12% annually. The "car value at lease end" figure shows what your vehicle would be worth if you had bought it instead of leasing.
When Leasing Makes Financial Sense
- You drive fewer than 12,000–15,000 miles/year. Most leases include mileage caps. Staying within them keeps the deal favorable; exceeding them triggers per-mile penalties of $0.15–$0.30/mile.
- You want a new car every 2–3 years. Leasing lets you cycle into new vehicles with the latest safety technology and warranty coverage without the hassle of selling or trading in.
- You use the car for business. Business owners can often deduct a portion of lease payments as a business expense, making leasing more tax-efficient than buying (consult a tax professional).
- You want predictable costs. A leased car is always under warranty. You'll rarely face unexpected repair bills during the lease term.
When Buying Makes Financial Sense
- You keep cars 5+ years. Once a car loan is paid off, your cost drops to only insurance and maintenance — zero payment. Lease payments never end. Over a 10-year horizon, owners almost always come out ahead financially.
- You drive more than 15,000 miles/year. Excess mileage penalties make leasing expensive for high-mileage drivers. Buying eliminates this constraint entirely.
- You want to customize the vehicle. Leased vehicles must be returned in stock condition. Buyers can modify their cars freely.
- You want to build equity. Every loan payment builds equity in an asset you own. A paid-off car is a financial asset; an expired lease leaves you with nothing.
- You have good credit and access to low-rate financing. Loan rates below 4–5% make buying even more competitive against leasing on a total-cost basis.
Hidden Costs to Watch in Both Options
Beyond the numbers in this calculator, be aware of additional costs. For leases: acquisition fees ($500–$1,000), disposition fees at lease end ($300–$500), excess wear-and-tear charges, and gap insurance (usually included in manufacturer leases but verify). For purchases: sales tax (often significantly higher than on leases, since you pay tax on the full purchase price), registration fees, and depreciation risk if you need to sell unexpectedly. Always get the total out-of-pocket cost in writing before signing either deal.