Compare the total cost of leasing versus financing a vehicle to find the best financial path.
Buying (Loan)
Leasing
Total Buying Cost*
Total Leasing Cost*
*Total cost is calculated as (Payments + Fees) minus (Vehicle Value at end of term).
Lease vs. Buy: Which One is Right for You?
Deciding whether to lease or buy a car is one of the most significant financial choices you'll make regarding transportation. While a monthly lease payment is often lower than a loan payment, the long-term math can be surprising once equity and resale value are factored in.
Understanding the Buying Model
When you buy a car with a loan, your goal is eventual ownership. You pay the full purchase price plus interest. At the end of the loan term, you own an asset that retains some value. For example, if you buy a $35,000 SUV and it's worth $18,000 after 5 years, your "net cost" is the total of your payments minus that $18,000 equity.
Understanding the Leasing Model
Leasing is essentially a long-term rental. You are paying for the vehicle's depreciation during the 24 to 48 months you drive it. You usually have lower monthly payments and can drive a newer car more often, but you never gain equity. At the end of the term, you return the car and have zero assets to show for your payments.
Financial Comparison Example
Scenario A (Buying): A 5-year loan on a $35,000 car at 5.5% interest with $5,000 down results in a monthly payment of approximately $573. Over 5 years, you pay $34,380 in payments. Subtracting an $18,000 resale value, your net cost is roughly $21,380.
Scenario B (Leasing): A 3-year lease at $399/month with $3,000 down. Total cost for 3 years is $17,364. To compare this to a 5-year loan fairly, you'd need to calculate 5 years of leasing, which would exceed $28,000—and you still wouldn't own the car.
Key Factors to Consider
Beyond the raw numbers, consider these qualitative factors:
Mileage: Leases typically limit you to 10,000–15,000 miles per year. Overages can cost $0.20 to $0.30 per mile.
Maintenance: Leased cars are usually under warranty for the entire term, whereas owners must pay for repairs after the warranty expires.
Customization: If you like to tint windows or upgrade the sound system, buying is the only option, as leases require the car to be returned in original condition.
function calculateLeaseVsBuy() {
// Buy Inputs
var buyPrice = parseFloat(document.getElementById("buyPrice").value) || 0;
var buyDown = parseFloat(document.getElementById("buyDown").value) || 0;
var buyInterest = parseFloat(document.getElementById("buyInterest").value) || 0;
var buyTerm = parseFloat(document.getElementById("buyTerm").value) || 0;
var buyResale = parseFloat(document.getElementById("buyResale").value) || 0;
// Lease Inputs
var leaseMonthly = parseFloat(document.getElementById("leaseMonthly").value) || 0;
var leaseDown = parseFloat(document.getElementById("leaseDown").value) || 0;
var leaseTerm = parseFloat(document.getElementById("leaseTerm").value) || 0;
var leaseFees = parseFloat(document.getElementById("leaseFees").value) || 0;
var leaseDisp = parseFloat(document.getElementById("leaseDisp").value) || 0;
// Calculation for Buy Loan Monthly Payment
var principal = buyPrice – buyDown;
var monthlyRate = (buyInterest / 100) / 12;
var monthlyLoanPayment = 0;
if (monthlyRate === 0) {
monthlyLoanPayment = principal / buyTerm;
} else {
monthlyLoanPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, buyTerm)) / (Math.pow(1 + monthlyRate, buyTerm) – 1);
}
// Total Cost of Buying (Normalized to the term provided)
// We calculate the net cost: (Down payment + Total monthly payments) – Resale Value
var totalBuyCostVal = (monthlyLoanPayment * buyTerm) + buyDown – buyResale;
// Total Cost of Leasing (Normalized to the term provided)
// (Monthly payment * Term) + Due at signing + Extra fees + Disposition
var totalLeaseCostVal = (leaseMonthly * leaseTerm) + leaseDown + leaseFees + leaseDisp;
// Since terms might differ, we normalize to a "Cost Per Month" to make it fair
var monthlyBuyCost = totalBuyCostVal / buyTerm;
var monthlyLeaseCost = totalLeaseCostVal / leaseTerm;
// Display Results
document.getElementById("totalBuyCost").innerHTML = "$" + totalBuyCostVal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("totalLeaseCost").innerHTML = "$" + totalLeaseCostVal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var resultBox = document.getElementById("resultBox");
var winnerMessage = document.getElementById("winnerMessage");
resultBox.style.display = "block";
resultBox.style.backgroundColor = "#e8f0fe";
if (monthlyBuyCost < monthlyLeaseCost) {
winnerMessage.innerHTML = "Buying is Financially Better!";
winnerMessage.style.color = "#2e7d32";
var diff = (monthlyLeaseCost – monthlyBuyCost).toFixed(2);
winnerMessage.innerHTML += "You save approx. $" + diff + " per month by purchasing.";
} else {
winnerMessage.innerHTML = "Leasing is Financially Better!";
winnerMessage.style.color = "#1a73e8";
var diff = (monthlyBuyCost – monthlyLeaseCost).toFixed(2);
winnerMessage.innerHTML += "You save approx. $" + diff + " per month by leasing.";
}
}