Compare the monthly payments and total costs of financing vs. leasing a vehicle.
Comparison Summary
Monthly Loan Payment (Buy):
Monthly Lease Payment:
Total Out-of-Pocket (Loan):
Total Out-of-Pocket (Lease):
Estimated Equity After Term (Buy):
Lease vs. Buy: Which Financial Path is Better?
Deciding whether to lease or buy a car is one of the most common financial dilemmas for drivers. While both options get you behind the wheel, they serve very different financial goals. This Car Lease vs. Buy Calculator helps you break down the monthly and long-term costs to make an informed decision.
How Does Financing (Buying) Work?
When you buy a car using a loan, you are borrowing the full price of the vehicle (minus your down payment). Each payment builds equity. Once the loan is paid off, you own the asset entirely.
Pros: No mileage limits, you can sell it anytime, and you eventually stop making payments.
Cons: Higher monthly payments and you are responsible for the vehicle's depreciation.
How Does Leasing Work?
Leasing is essentially "renting" the vehicle's depreciation for a set period. You only pay for the difference between the car's current price and its predicted value at the end of the term (the residual value).
Pros: Lower monthly payments, always driving a new car under warranty.
Cons: Mileage restrictions, "rent charge" (interest) on the whole value, and you have no equity at the end.
The Math Behind the Calculator
Our calculator uses industry-standard formulas to provide an accurate comparison:
Loan Payment: Calculated using the standard amortization formula: P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ].
Lease Payment: Calculated by adding monthly depreciation (Net Cap Cost – Residual / Term) and the money factor (Net Cap Cost + Residual * Money Factor).
Equity: We assume your equity in a purchase is roughly equivalent to the residual value used in the lease calculation.
Real-World Example
Imagine a $35,000 SUV with a 3-year term and a $5,000 down payment:
Buying: With a 5% interest rate, your payment might be around $900/month. After 3 years, you still owe money but own a vehicle worth $21,000.
Leasing: Your payment might drop to $450/month. After 3 years, you return the car and have $0 in equity, but you've saved $16,200 in monthly cash flow.
function calculateLeaseVsBuy() {
var price = parseFloat(document.getElementById("vehiclePrice").value);
var down = parseFloat(document.getElementById("downPayment").value);
var rate = parseFloat(document.getElementById("interestRate").value);
var term = parseFloat(document.getElementById("termMonths").value);
var residual = parseFloat(document.getElementById("residualValue").value);
var taxRate = parseFloat(document.getElementById("salesTax").value) / 100;
if (isNaN(price) || isNaN(down) || isNaN(rate) || isNaN(term) || isNaN(residual)) {
alert("Please enter valid numerical values.");
return;
}
// 1. Loan Calculation (Buying)
var loanPrincipal = price – down;
var monthlyRate = (rate / 100) / 12;
var loanPmt = 0;
if (monthlyRate === 0) {
loanPmt = loanPrincipal / term;
} else {
loanPmt = loanPrincipal * (monthlyRate * Math.pow(1 + monthlyRate, term)) / (Math.pow(1 + monthlyRate, term) – 1);
}
var loanPmtWithTax = loanPmt * (1 + taxRate);
var totalLoanOutofPocket = (loanPmtWithTax * term) + down;
// 2. Lease Calculation
// Money Factor is approx APR / 2400
var moneyFactor = (rate / 100) / 24;
var capCost = price – down;
var depreciationTotal = capCost – residual;
var monthlyDepreciation = depreciationTotal / term;
var monthlyFinanceCharge = (capCost + residual) * moneyFactor;
var leasePmt = monthlyDepreciation + monthlyFinanceCharge;
var leasePmtWithTax = leasePmt * (1 + taxRate);
var totalLeaseOutofPocket = (leasePmtWithTax * term) + down;
// 3. Display Results
document.getElementById("results").style.display = "block";
document.getElementById("loanMonthly").innerText = "$" + loanPmtWithTax.toFixed(2);
document.getElementById("leaseMonthly").innerText = "$" + leasePmtWithTax.toFixed(2);
document.getElementById("totalLoanCost").innerText = "$" + totalLoanOutofPocket.toFixed(2);
document.getElementById("totalLeaseCost").innerText = "$" + totalLeaseOutofPocket.toFixed(2);
document.getElementById("equityValue").innerText = "$" + residual.toFixed(2);
// 4. Logic Verdict
var monthlySavings = loanPmtWithTax – leasePmtWithTax;
var verdictElement = document.getElementById("verdict");
if (monthlySavings > 0) {
verdictElement.innerHTML = "Leasing saves you $" + monthlySavings.toFixed(2) + " per month in cash flow, but buying builds $" + residual.toFixed(2) + " in estimated equity.";
} else {
verdictElement.innerHTML = "In this scenario, financing is highly competitive with leasing costs.";
}
// Scroll to results
document.getElementById("results").scrollIntoView({ behavior: 'smooth' });
}