Lease vs. Buy Calculator

How to use the lease vs. buy calculator

Enter vehicle price, down payment, loan rate, residual value percentage, lease monthly payment, and lease term. The calculator shows net cost of buying versus total cost of leasing. Note: this excludes insurance, maintenance, and taxes. Add 20–30% to account for real-world costs.

Understanding the inputs

Vehicle price (MSRP): Manufacturer’s suggested retail price or negotiated purchase price.

Down payment: Upfront money for purchase. Leases often have similar “money down” (cap reduction).

Loan interest rate: Your auto loan APR. Current rates: 4–7% depending on credit score and term. Shop rates from multiple lenders (banks, credit unions, dealer financing).

Loan term (months): Typically 48–72 months (4–6 years). Longer terms lower monthly payments but increase total interest paid.

Residual value %: What the car is worth at end of loan term as percentage of original price. Typical: 50–60% for sedans, 60–70% for Japanese brands, 40–50% for luxury brands. Check Kelley Blue Book for specific models.

Lease monthly payment: Monthly cost to lease. Lease payments are based on depreciation, interest rate factor (money factor), and residual value set by the leasing company.

Lease term: Typical lease is 36 months (3 years) or 48 months (4 years). Monthly payment scales linearly.

Lease economics

How leases are priced:

Lease payment = (Vehicle price − Residual value + Fees) / Lease term + Interest charges

The leasing company sets residual value. A $30k vehicle with 60% residual drops to $18k in 3 years; this $12k depreciation is amortized over 36 months ($333/month) plus interest ($50/month) = base lease payment.

Mileage limits:

• 12k miles/year: $0.20 per overage mile → $3,600 for 18k miles over 3 years
• 15k miles/year: Fewer overages; often $10–15 more per month in lease cost
• Unlimited: Rare; expensive

Wear and tear:

You’re responsible for damage beyond normal wear. Deep scratches, dents > 1 inch, stains, or mechanical issues cost $500–$2,500 at lease-end.

Buying economics

How depreciation works:

New vehicles lose 20% value in year 1, 15% in year 2, then ~10% annually. A $30k car worth $24k after 1 year, $20k after 2 years, $18k after 3 years.

Loan interest:

On a $24k loan (80% of $30k) at 5% over 60 months: monthly payment ~$450; total interest paid ~$2,700.

Maintenance:

Year 1–3: Minimal (tires, oil changes, routine). ~$500/year. Year 4–7: Increasing (brakes, belts, batteries). ~$1,000–$1,500/year. Year 8+: Unpredictable (transmission, suspension, major repairs). ~$2,000+/year.

Key metrics

Cost per mile: Total cost ÷ miles driven.

• Lease: $0.30–$0.50/mile all-in (including overage, insurance, maintenance)
• Buy: $0.20–$0.40/mile depending on vehicle, age, maintenance

Break-even mileage: At what annual miles does buying beat leasing?

• Low-mileage driver (12k/year): Lease often cheaper
• High-mileage driver (20k+/year): Buying always cheaper (lease overages kill lease advantage)

Considerations beyond calculator

Customization: Leased cars must be returned in good condition. Buying allows custom wheels, audio, modifications.

Reliability: Newer leased cars rarely break down. Used cars may have unexpected repair bills.

Flexibility: Lease ties you to a 3–4 year commitment. Buying gives freedom to sell or trade anytime (though you may owe more than vehicle is worth early on).

Luxury/performance: Leasing luxury cars (BMW, Audi, Mercedes) is attractive because warranty covers expensive repairs. Buying luxury cars becomes costly after warranty expires.

Related calculators

Use our auto loan calculator for detailed loan payment breakdowns. For broader personal finance planning, see our loan calculator or budget calculator.

Disclaimer

This calculator provides estimates for educational purposes. It excludes insurance, maintenance, taxes, registration, and mileage overage fees. Actual costs vary based on vehicle, market, driving habits, and insurance needs. Consult your lease agreement, insurance provider, and a financial advisor for complete cost analysis.

Total cost of ownership: the full picture

While this calculator focuses on tangible costs (down payment, payments, residual value), real-world vehicle costs include:

• Insurance: Comprehensive + collision + liability. Typical $1,000–$1,500/year for owned vehicle; $800–$1,200/year for leased (lower due to warranty)
• Maintenance: Oil changes, tire rotation, wear items. Leased = covered; owned = $500–$1,500/year after warranty expires
• Repairs: Unexpected ($1,000–$5,000+). Leased = covered; owned = your cost
• Registration/tags: Annual cost varies by state ($100–$400+)
• Fuel: Depends on driving style and vehicle efficiency; similar for lease vs. buy
• Mileage overage: Lease fees (typically $0.20–$0.30/mile) can total thousands if you exceed allowance

Full cost example: $30k vehicle, $6k down, 4.5% loan

This calculator shows: Buy net cost = $17,432 (down payment + loan payments − residual value)

But true cost includes:

• Insurance for 5 years: ~$6,000
• Maintenance/repairs years 1–5: ~$2,500
• Registration/tags: ~$1,500
• True cost: ~$17,432 + $10,000 = $27,432 total

Full cost example: $30k vehicle, $350/month lease, 36 months

This calculator shows: Lease total cost = $14,600 (down payment + monthly payments)

But true cost includes:

• Insurance for 3 years: ~$3,000
• Maintenance (covered)
• Registration (usually included)
• Mileage overages (if you exceed 45,000 miles): potentially $1,200–$2,000
• True cost: ~$14,600 + $3,000 + overages = $17,600–$19,600 total

In this scenario, buy and lease costs are nearly equal all-in. Choose based on preference, not pure cost.

Mileage considerations

This is often the deciding factor:

Low-mileage driver (10,000–12,000 miles/year):

• Lease: Perfect fit for standard 12,000–15,000 miles/year allowance
• Buy: Unnecessary to own when you could lease and avoid depreciation risk

Moderate-mileage driver (15,000–18,000 miles/year):

• Lease: Approaching overage limits; additional $0.25/mile adds up
• Buy: Better value; you’ll keep car long enough to depreciate less than you’d pay in overages

High-mileage driver (20,000+ miles/year):

• Lease: Nightmarish (overage fees total $1,200–$2,400+ annually)
• Buy: Only sensible option; keep car 5–7+ years to amortize depreciation

When to lease vs. when to buy

Lease if:

1. You drive 10,000–15,000 miles/year
2. You prefer new cars every 3–4 years
3. You value predictable costs (warranty covers everything)
4. You don’t modify vehicles (lease requires return in good condition)
5. You want zero maintenance hassle
6. You dislike the used-car selling process
7. You have a stable commute (low mileage variability)

Buy if:

1. You drive 18,000+ miles/year
2. You like driving cars 5–10+ years (amortize depreciation)
3. You want to customize/modify (wheels, audio, suspension)
4. You want to build equity (paying down loan = ownership)
5. You dislike predictable but high lease payments
6. You’re comfortable with maintenance responsibility
7. You want flexibility (sell/trade anytime without penalty)

Special cases

Luxury/high-performance cars

Lease advantage: Warranty coverage is critical. A $70k luxury car’s transmission repair can cost $5,000–$8,000. Leasing insures against these surprises. Depreciation on luxury cars is steep (40–50% residual); leasing avoids this.

Example: $70k BMW X5, 36-month lease at $600/month = $21,600 + $2,000 down = $23,600 total. Same car purchased at $70k, financed at 5%, sells for $35k after 3 years = $35k purchase − $35k sale = $35k net cost of depreciation + $8,000 interest + $4,000 insurance + $2,000 maintenance = $49,000 true cost. Leasing saves $25,000.

Pickup trucks/work vehicles

Buy advantage: Depreciation on work vehicles is low (70%+ residual is common). If you keep trucks 8–10 years and use them for side income, depreciation per year is minimal. Lease doesn’t make sense for work vehicles used heavily.

Electric vehicles (EVs)

Lease advantage: Battery technology improving rapidly; battery degradation risk is real (though warranties now cover 8–10 years). Leasing a Tesla Model 3 lets you avoid battery concerns. Lease payments are often competitive due to federal tax credits (leasing company passes some savings to you).

Buy advantage: After-lease credits coming to EV market soon. If you can wait 1–2 years, buying EVs will become much cheaper as lease programs mature.

Negotiation strategies

On purchases

• Shop around for best loan rates (banks, credit unions, dealer financing)
• Negotiate purchase price BEFORE mentioning financing
• Get pre-approved for loan to strengthen negotiating position
• Check residual value (Kelley Blue Book, edmunds.com) to ensure fair offer

On leases

• Lease payment is negotiable; it’s not the only price
• Negotiate capitalized cost (how dealer values the car), not just monthly payment
• Shop multiple dealers; compare total lease cost, not just payment
• Consider lease-end buyout option if you want flexibility later

Related calculators and resources

Use our auto loan calculator for detailed loan payment breakdowns and affordability. For broader personal finance planning, see our loan calculator or budget calculator.

Disclaimer: The examples and calculations provided here are for educational purposes. For current benchmark rates, please refer to authoritative sources such as the Federal Reserve (2025) or your local financial institution.\n