Deciding between leasing and buying a vehicle is a major financial decision that depends on your driving habits, budget, and long-term goals. While buying offers ownership and equity, leasing provides lower monthly payments and the opportunity to drive a new car every few years.
Understanding the Math
When you lease, you are essentially paying for the vehicle's depreciation during the time you drive it, plus interest (known as the money factor) and fees. When you buy, your loan payments go toward the total purchase price of the car, eventually leading to full ownership.
Key Factors to Consider:
Annual Mileage: Leases usually limit you to 10,000–15,000 miles per year. If you drive more, buying is likely better.
Monthly Cash Flow: Leases almost always offer lower monthly payments for the same vehicle compared to a loan.
Maintenance: Newer leased cars are often covered by factory warranties, whereas older owned cars may require expensive out-of-pocket repairs.
Residual Value: This is the estimated value of the car at the end of the lease. A higher residual value lowers your monthly lease payment.
Calculation Example
Imagine a car priced at $35,000. With a 60% residual value after 3 years, you are financing $14,000 of depreciation. In a purchase scenario with a 5-year loan at 4.5% interest, you are financing the full $35,000 (minus down payment). Over 3 years, the lease might cost you $18,000 total, whereas the loan might cost $22,000 in payments—but at the end of the loan, you own an asset worth $21,000.
function calculateLeaseVsBuy() {
// Get Inputs
var price = parseFloat(document.getElementById('vehiclePrice').value) || 0;
var taxRate = (parseFloat(document.getElementById('salesTax').value) || 0) / 100;
// Lease Inputs
var leaseTerm = parseFloat(document.getElementById('leaseTerm').value) || 0;
var moneyFactor = parseFloat(document.getElementById('moneyFactor').value) || 0;
var residualPercent = (parseFloat(document.getElementById('residualPercent').value) || 0) / 100;
var leaseDown = parseFloat(document.getElementById('leaseDown').value) || 0;
// Buy Inputs
var loanTerm = parseFloat(document.getElementById('loanTerm').value) || 0;
var loanAPR = (parseFloat(document.getElementById('loanAPR').value) || 0) / 100;
var buyDown = parseFloat(document.getElementById('buyDown').value) || 0;
// LEASE CALCULATION
var netCapCost = price – leaseDown;
var residualValue = price * residualPercent;
var monthlyDepreciation = (netCapCost – residualValue) / leaseTerm;
var monthlyFinanceCharge = (netCapCost + residualValue) * moneyFactor;
var leaseBasePayment = monthlyDepreciation + monthlyFinanceCharge;
var leaseMonthlyTotal = leaseBasePayment * (1 + taxRate);
var totalLeaseCost = (leaseMonthlyTotal * leaseTerm) + leaseDown;
// BUY CALCULATION
var amountFinanced = (price * (1 + taxRate)) – buyDown;
var monthlyInterestRate = loanAPR / 12;
var buyMonthly;
if (monthlyInterestRate === 0) {
buyMonthly = amountFinanced / loanTerm;
} else {
buyMonthly = amountFinanced * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTerm)) / (Math.pow(1 + monthlyInterestRate, loanTerm) – 1);
}
var totalBuyCost = (buyMonthly * loanTerm) + buyDown;
// Display Results
document.getElementById('results').style.display = 'block';
document.getElementById('leaseMonthlyDisplay').innerText = '$' + leaseMonthlyTotal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('leaseTotalCostDisplay').innerText = 'Total Cost (Term): $' + totalLeaseCost.toLocaleString(undefined, {maximumFractionDigits: 0});
document.getElementById('buyMonthlyDisplay').innerText = '$' + buyMonthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('buyTotalCostDisplay').innerText = 'Total Loan Cost: $' + totalBuyCost.toLocaleString(undefined, {maximumFractionDigits: 0});
var verdictDiv = document.getElementById('verdict');
var monthlyDiff = Math.abs(buyMonthly – leaseMonthlyTotal).toFixed(2);
if (leaseMonthlyTotal < buyMonthly) {
verdictDiv.style.backgroundColor = '#e3f2fd';
verdictDiv.style.color = '#0d47a1';
verdictDiv.innerText = 'Leasing saves you $' + monthlyDiff + ' per month compared to buying.';
} else {
verdictDiv.style.backgroundColor = '#f1f8e9';
verdictDiv.style.color = '#33691e';
verdictDiv.innerText = 'Buying saves you $' + monthlyDiff + ' per month compared to leasing.';
}
// Scroll to results
document.getElementById('results').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}