Car Lease vs. Buy Calculator
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Leasing Details
Total Cost to Buy
Total Cost to Lease
Understanding Lease vs. Buy: Which is Right for You?
Choosing between leasing and buying a car is one of the most significant financial decisions you'll make regarding transportation. While buying a vehicle builds equity, leasing offers lower monthly payments and the opportunity to drive a new car every few years.
The Economics of Buying
When you buy a car, you are financing the entire cost of the vehicle. Once the loan is paid off, you own the asset outright. The "True Cost" of buying is calculated by taking the total of all loan payments plus your down payment, and then subtracting the vehicle's resale value at the end of the period.
- Pros: Ownership equity, no mileage limits, ability to customize.
- Cons: Higher monthly payments, long-term maintenance costs, depreciation risk.
The Economics of Leasing
Leasing is essentially "renting" the car for its most depreciable years. You only pay for the difference between the car's current price and its predicted residual value at the end of the lease, plus interest (money factor) and fees.
- Pros: Lower monthly payments, lower repair costs (usually under warranty), latest technology.
- Cons: No ownership equity, mileage restrictions, "perpetual" car payments.
Example Comparison
Consider a $35,000 SUV. If you buy it with a 5-year loan at 5%, your payment might be around $566. After 5 years, you might sell it for $15,000. Your net cost is total payments minus $15k. If you lease that same SUV for 3 years at $450/month, you pay for the use of the car without the hassle of selling it, but you have no asset at the end.
Frequently Asked Questions
Buying is usually better for high-mileage drivers. Leases typically charge $0.15 to $0.25 per mile over the limit (often 10k-12k miles/year).
Ending a lease early is often very expensive, involving "early termination fees" that can equal the remaining payments. Buying offers more flexibility to sell at any time.