Car Lease vs. Buy Calculator
Option 1: Buying (Loan)
Option 2: Leasing
Total Cost to Buy
$0
Total Cost to Lease
$0
Lease vs. Buy: Which is More Cost-Effective?
Deciding whether to lease or buy a car is one of the most significant financial decisions for many households. While buying a car often seems like the traditional choice, leasing has become increasingly popular due to lower monthly payments and the ability to drive a new vehicle every few years.
How This Calculator Works
This calculator compares the Net Cost of both options. For buying, the net cost is calculated as: (Total Loan Payments + Down Payment) – Resale Value. For leasing, the cost is simply the sum of all monthly payments and up-front fees.
Pros of Buying a Car
- Equity: Once the loan is paid off, you own the asset and can sell it or trade it in.
- No Mileage Limits: You don't have to worry about "excess mileage" charges common in lease contracts.
- Customization: You can modify the car however you like.
- Cheaper Long-Term: Holding onto a car for 8–10 years is almost always cheaper than leasing consecutive vehicles.
Pros of Leasing a Car
- Lower Monthly Payments: Since you only pay for the car's depreciation during the lease term, payments are usually lower than a loan.
- Always Under Warranty: Most lease terms match the manufacturer's bumper-to-bumper warranty.
- Lower Maintenance Costs: Newer cars generally require fewer repairs.
- Simplicity: At the end of the term, you simply drop the keys off and get a new car.
Realistic Example
Imagine a SUV priced at $40,000. Buying: With $5,000 down and a 5% interest rate over 60 months, your payment is ~$660. After 5 years, you've paid ~$44,600. If the SUV is worth $20,000, your net cost is $24,600. Leasing: A 36-month lease might cost $450/month with $3,000 down. Total cost for 3 years is $19,200. While the monthly cost is lower, you have $0 equity at the end. To compare fairly, this calculator looks at the total out-of-pocket expense over the specified periods.