Car Lease vs. Buying: Which is Better for Your Wallet?
Deciding whether to lease or buy a car is one of the most significant financial decisions for any household. While leasing offers lower monthly payments and the chance to drive a new vehicle every few years, buying is often considered a long-term investment that builds equity. This calculator helps you break down the true costs of both options over a 5-year period.
Understanding the Math Behind the Comparison
To accurately compare leasing and buying, we must look at the Net Cost of Ownership. This isn't just about the monthly payment; it's about how much money leaves your pocket and what you have left to show for it at the end.
1. The Cost of Leasing
When you lease, you are essentially paying for the vehicle's depreciation during the time you drive it, plus interest and fees.
Total Lease Cost: Down Payment + (Monthly Payment × Term).
Benefit: Lower monthly cash flow requirement and no resale hassle.
Downside: You own 0% of the asset at the end of the term.
2. The Cost of Buying (Financing)
Buying involves paying the full price of the car plus interest on your loan. However, you own the vehicle at the end.
Total Loan Cost: Down Payment + (Monthly Loan Payment × Loan Term).
Net Buying Cost: Total Loan Cost – Resale Value of the car.
Benefit: You build equity and eventually have no car payments.
Example Scenario: $35,000 SUV
Let's look at a realistic example using the calculator defaults:
Vehicle Price: $35,000
Lease: $5,000 down and $400/month for 36 months. Total cost: $19,400. After 3 years, you have no car and must start a new lease or buy one.
Buy: $5,000 down, 5.5% interest for 60 months. Monthly payment is roughly $573. Total paid over 5 years: $39,380. If the car is worth $15,000 after 5 years, your net cost is $24,380.
In this case, while buying has a higher "net cost" over 5 years than a single 3-year lease, you are left with a vehicle worth $15,000 that can provide several more years of payment-free driving.
Key Factors to Consider
Mileage Limits
Leases typically restrict you to 10,000 to 15,000 miles per year. If you have a long commute, buying is almost always better to avoid excessive mileage penalties (often $0.20 to $0.30 per mile).
Wear and Tear
Lease returns are inspected strictly. If you have kids or pets that might damage the interior, or if you park on busy streets where dings are likely, buying protects you from "excessive wear and tear" charges at the end of a lease.
Tax Implications
In many states, you only pay sales tax on the monthly lease payment rather than the full vehicle price. For business owners, leasing can often be written off as a business expense more easily than vehicle depreciation.
function calculateLeaseVsBuy() {
// Get Input Values
var price = parseFloat(document.getElementById('carPrice').value);
var down = parseFloat(document.getElementById('downPayment').value);
var lTerm = parseFloat(document.getElementById('leaseTerm').value);
var lMonthly = parseFloat(document.getElementById('leaseMonthly').value);
var rate = parseFloat(document.getElementById('loanRate').value) / 100 / 12;
var bTerm = parseFloat(document.getElementById('loanTerm').value);
var resale = parseFloat(document.getElementById('resaleValue').value);
var taxRate = parseFloat(document.getElementById('salesTax').value) / 100;
if (isNaN(price) || isNaN(down) || isNaN(lMonthly)) {
alert("Please enter valid numbers in all fields.");
return;
}
// Lease Calculation
var totalLeaseCost = down + (lMonthly * lTerm);
// Buy Calculation (Loan)
var loanAmount = price – down;
var buyMonthly = 0;
if (rate > 0) {
buyMonthly = (loanAmount * rate * Math.pow(1 + rate, bTerm)) / (Math.pow(1 + rate, bTerm) – 1);
} else {
buyMonthly = loanAmount / bTerm;
}
var totalPaidLoan = down + (buyMonthly * bTerm) + (price * taxRate);
var netBuyCost = totalPaidLoan – resale;
// Display Results
document.getElementById('results').style.display = 'block';
document.getElementById('totalLease').innerText = '$' + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalBuy').innerText = '$' + netBuyCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var verdict = document.getElementById('verdictText');
if (netBuyCost < totalLeaseCost) {
verdict.innerHTML = "Verdict: Buying is financially better!";
} else {
var diff = netBuyCost – totalLeaseCost;
if (diff < 3000) {
verdict.innerHTML = "Verdict: It's a toss-up! Choose based on lifestyle.";
} else {
verdict.innerHTML = "Verdict: Leasing is cheaper for this term.";
}
}
}