Lease vs. Buy: Which Financial Move is Right for You?
Deciding whether to lease or buy a car is one of the most significant financial decisions for many households. While both options result in you driving a vehicle, the long-term financial impacts differ drastically. This calculator helps you break down the numbers to see which path costs you more over a set period of time.
The Financial Mechanics of Leasing
When you lease a car, you are essentially paying for the depreciation of the vehicle during the time you drive it, plus interest (often called a "money factor").
Lower Monthly Payments: Since you aren't paying for the entire value of the car, your monthly cash flow is usually better.
Maintenance: Most new car leases stay within the manufacturer's warranty period, reducing unexpected repair costs.
No Resale Hassle: At the end of the term, you simply return the car and move on to the next one.
The Long-Term Logic of Buying
Buying a car (financing) involves paying for the entire vehicle price plus interest. While the monthly payments are higher, you are building equity.
Ownership: Once the loan is paid off, you own an asset. You can drive it for years without any monthly payments.
No Mileage Limits: Leases often cap your driving at 10,000 to 15,000 miles per year. Buying gives you total freedom.
Resale Value: When you decide to move on, you can sell the car and use that cash toward your next purchase.
How This Calculator Works
Our calculator compares the "Net Cost" over the lease term (usually 3 years). To provide a fair comparison, it looks at:
Lease: Down payment + (Monthly payment × Lease term).
Buy: We calculate the loan payment based on your interest rate. We then calculate the total cost paid over the same duration as the lease and subtract the estimated Resale Value of the car at that point.
Real-World Example
Imagine a $35,000 car with a $5,000 down payment. A 36-month lease might cost you $450/month. Total cost: $21,200. If you buy that same car with a 5.5% interest rate, your payment might be $573/month. Over 3 years, you spend $25,628. However, if the car is still worth 55% of its value ($19,250), your net cost to buy is only $6,378. In this scenario, buying is significantly cheaper in the long run despite the higher monthly payments.
function calculateLeaseBuy() {
var vehiclePrice = parseFloat(document.getElementById('vehiclePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var leaseMonthly = parseFloat(document.getElementById('leaseMonthly').value);
var leaseTerm = parseFloat(document.getElementById('leaseTerm').value);
var loanInterest = parseFloat(document.getElementById('loanInterest').value);
var resaleValuePercent = parseFloat(document.getElementById('resaleValue').value);
if (isNaN(vehiclePrice) || isNaN(downPayment) || isNaN(leaseMonthly) || isNaN(leaseTerm)) {
alert("Please enter valid numeric values.");
return;
}
// Lease Calculation
var totalLeaseCost = (leaseMonthly * leaseTerm) + downPayment;
// Loan Calculation (Purchase)
// We assume a standard 60-month loan term to find the monthly payment,
// but compare costs over the specific Lease Term provided.
var loanAmount = vehiclePrice – downPayment;
var monthlyRate = (loanInterest / 100) / 12;
var standardLoanTerm = 60; // Standard comparison term
var loanPayment = 0;
if (monthlyRate > 0) {
loanPayment = (loanAmount * monthlyRate * Math.pow(1 + monthlyRate, standardLoanTerm)) / (Math.pow(1 + monthlyRate, standardLoanTerm) – 1);
} else {
loanPayment = loanAmount / standardLoanTerm;
}
// Cost of buying over the same period as the lease
var totalPaidInTerm = (loanPayment * leaseTerm) + downPayment;
// Future value of car (Resale)
var estimatedValue = vehiclePrice * (resaleValuePercent / 100);
// Net cost of buying is what you spent minus what the car is worth
// To be fair, we must also consider the remaining loan balance if comparing early
var remainingBalance = loanAmount;
for (var i = 0; i < leaseTerm; i++) {
var interestForMonth = remainingBalance * monthlyRate;
var principalForMonth = loanPayment – interestForMonth;
remainingBalance -= principalForMonth;
}
// Net Buying Cost = (Total Payments so far) – (Current Value – Remaining Debt)
var netBuyCost = totalPaidInTerm – (estimatedValue – remainingBalance);
// Update UI
document.getElementById('totalLeaseCost').innerText = "$" + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalBuyCost').innerText = "$" + netBuyCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var recDiv = document.getElementById('recommendation');
if (netBuyCost < totalLeaseCost) {
recDiv.innerText = "FINANCIAL WINNER: BUYING. You save approximately $" + (totalLeaseCost – netBuyCost).toLocaleString(undefined, {maximumFractionDigits: 0}) + " in net value over " + leaseTerm + " months.";
recDiv.style.backgroundColor = "#d4edda";
recDiv.style.color = "#155724";
} else {
recDiv.innerText = "FINANCIAL WINNER: LEASING. You save approximately $" + (netBuyCost – totalLeaseCost).toLocaleString(undefined, {maximumFractionDigits: 0}) + " in total costs over " + leaseTerm + " months.";
recDiv.style.backgroundColor = "#fff3cd";
recDiv.style.color = "#856404";
}
document.getElementById('results').style.display = 'block';
}