*Total cost accounts for monthly payments, down payments, fees, and the estimated equity/resale value of the car at the end of the term.
Lease vs. Buy: Which Car Financing Path is Right for You?
Deciding whether to lease or buy a new car is one of the most significant financial decisions a household makes. While monthly payments often drive the initial choice, the long-term financial impact varies significantly based on your driving habits, how long you keep vehicles, and current interest rates.
Understanding the Calculation
To provide a fair "apples-to-apples" comparison, our calculator looks at the Net Cost of Ownership. This is more than just looking at the monthly bill.
How Buying is Calculated
When you buy a car with a loan, your total cost includes the down payment plus all monthly principal and interest payments. However, at the end of the loan, you own an asset. To calculate the net cost, we subtract the estimated resale value of the car from your total payments. For example, if you spend $40,000 on payments but the car is worth $18,000 after five years, your net cost was $22,000.
How Leasing is Calculated
Leasing costs are simpler but usually higher in the long run because you never build equity. Your cost includes the "due at signing" amount (down payment, first month, and fees) plus every monthly payment throughout the term. Since you return the car at the end, your net cost is simply the sum of every dollar paid to the dealership.
Pros and Cons Comparison
Feature
Buying
Leasing
Ownership
You own it at the end.
You return it at the end.
Monthly Cost
Generally higher.
Generally lower.
Mileage
Unlimited.
Limited (e.g., 12k/year).
Customization
Full freedom to modify.
Must keep car stock.
Example Scenario: The $35,000 SUV
Imagine a typical $35,000 mid-sized SUV. If you buy it with $5,000 down at 5.5% interest for 60 months, your payment is roughly $573/month. After 5 years, you've paid roughly $39,380. If the car is worth $15,000, your net cost is $24,380.
If you lease that same SUV for $450/month for 36 months with $3,000 down, you pay $19,200 over 3 years. To compare this to the 5-year buying cycle, your effective cost per year is $6,400. Over 5 years, that's $32,000. In this realistic scenario, buying is significantly cheaper long-term.
function calculateLeaseBuy() {
// Buy Inputs
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var buyDown = parseFloat(document.getElementById('buyDownPayment').value) || 0;
var buyRate = parseFloat(document.getElementById('buyInterestRate').value) || 0;
var buyTerm = parseFloat(document.getElementById('buyTerm').value) || 1;
var resaleVal = parseFloat(document.getElementById('resaleValue').value) || 0;
// Lease Inputs
var leaseMonthly = parseFloat(document.getElementById('leaseMonthly').value) || 0;
var leaseDown = parseFloat(document.getElementById('leaseDownPayment').value) || 0;
var leaseTerm = parseFloat(document.getElementById('leaseTerm').value) || 1;
var leaseFees = parseFloat(document.getElementById('leaseFees').value) || 0;
// Buy Calculation (Loan Amortization)
var principal = purchasePrice – buyDown;
var monthlyRate = (buyRate / 100) / 12;
var monthlyBuyPayment = 0;
if (monthlyRate > 0) {
monthlyBuyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, buyTerm)) / (Math.pow(1 + monthlyRate, buyTerm) – 1);
} else {
monthlyBuyPayment = principal / buyTerm;
}
var totalBuyPayments = monthlyBuyPayment * buyTerm;
var netBuyCost = (totalBuyPayments + buyDown) – resaleVal;
var buyCostPerMonth = netBuyCost / buyTerm;
// Lease Calculation
var totalLeaseCost = (leaseMonthly * leaseTerm) + leaseDown + leaseFees;
var leaseCostPerMonth = totalLeaseCost / leaseTerm;
// Output formatting
document.getElementById('resultsContainer').style.display = 'block';
document.getElementById('totalBuyCost').innerText = '$' + netBuyCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('buyMonthlyDisplay').innerText = 'Effective cost: $' + buyCostPerMonth.toFixed(2) + '/mo';
document.getElementById('totalLeaseCost').innerText = '$' + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('leaseMonthlyDisplay').innerText = 'Effective cost: $' + leaseCostPerMonth.toFixed(2) + '/mo';
var verdict = document.getElementById('verdict');
if (buyCostPerMonth < leaseCostPerMonth) {
var diff = leaseCostPerMonth – buyCostPerMonth;
verdict.innerText = "Buying is financially better! You save approx. $" + diff.toFixed(2) + " per month.";
verdict.style.color = "#0d652d";
} else {
var diff = buyCostPerMonth – leaseCostPerMonth;
verdict.innerText = "Leasing is financially better! You save approx. $" + diff.toFixed(2) + " per month.";
verdict.style.color = "#1a73e8";
}
// Smooth scroll to results
document.getElementById('resultsContainer').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}