Lease vs. Buy Calculator
How to Use This Calculator
- 1
Enter the purchase price
Input the total cost to buy the asset outright if you were to finance it.
- 2
Enter the monthly lease payment
Input the fixed amount you would pay each month under the lease option.
- 3
Set the lease term in years
Specify how long the lease agreement lasts.
- 4
Enter the annual interest rate for buying
Provide the APR you would expect for a loan if purchasing the asset.
- 5
Set the loan term in years
Specify the total duration of the loan if buying.
- 6
Enter the residual value
Provide the estimated value of the asset at the end of the loan term.
- 7
Review your results
The calculator displays Total Lease Cost, Monthly Loan Payment, Total Buy Cost, and which option saves you more. The insights panel shows total interest paid and effective monthly cost for each option.
Example Calculation
A consumer is deciding whether to lease or buy a $25,000 car and wants to compare the total costs.
Purchase Price
$25,000
Monthly Lease Payment
$450
Lease Term
3 years
Interest Rate (Buy)
5%
Loan Term (Buy)
5 years
Residual Value
$5,000
Results
Total Lease Cost
$16,200.00
Monthly Loan Payment
$471.78
Total Buy Cost
$23,306.85
Leasing Saves You
$7,106.85
Tips
Compare Over the Same Time Horizon
If your lease is 3 years and your loan is 5 years, you'll need a new lease or car after year 3. Compare total costs over 5-10 years to get a true picture — two consecutive 3-year leases at $450/mo total $32,400 vs. $23,307 to buy.
Factor in Down Payments and Fees
Leases often require a down payment, acquisition fee, and disposition fee. Add these to your monthly lease payment calculation. A typical $2,000 down payment adds $56/mo to a 36-month lease's effective cost.
Consider Post-Loan Ownership
After a 5-year loan is paid off, you own the car with no monthly payment. Every year you drive it beyond that saves you $5,400+ compared to continuing to lease at $450/mo.
Lease vs. Buy: Understanding Your Options
Deciding whether to lease or buy an asset like a car or equipment is one of the most common financial decisions.
The Lease vs. Buy Calculator compares the total costs of each option — including monthly payments, interest, and residual value — so you can see which path costs less for your situation.
How the Lease vs. Buy Formulas Work
The calculator uses two separate formulas to compare total costs.
Lease Option:
Total Lease Cost = Monthly Lease Payment × Lease Term (Years) × 12
Buy Option:
- Monthly Loan Payment (standard amortization):
r = Annual Interest Rate / 12
n = Loan Term (Years) × 12
Monthly Payment = (Purchase Price × r × (1 + r)^n) / ((1 + r)^n - 1)
- Total Buy Cost (net of residual value):
Total Buy Cost = (Monthly Payment × n) - Residual Value
Where:
Purchase Priceis the total cost to buy the assetMonthly Lease Paymentis the fixed lease payment per monthResidual Valueis the asset's expected value at the end of the loan term
Worked Example: $25,000 Car
Lease Option:
- Monthly Payment: $450
- Lease Term: 3 years (36 months)
Total Lease Cost = $450 × 36 = $16,200
Buy Option:
- Purchase Price: $25,000
- Interest Rate: 5% APR
- Loan Term: 5 years (60 months)
- Residual Value: $5,000
Step 1 — Monthly Loan Payment: r = 0.05 / 12 = 0.0041667 n = 60 Monthly Payment = ($25,000 × 0.0041667 × 1.0041667^60) / (1.0041667^60 - 1) = $471.78
Step 2 — Total Buy Cost: Total Buy Cost = ($471.78 × 60) - $5,000 = $28,306.85 - $5,000 = $23,306.85
Result: Leasing costs $16,200 over 3 years while buying costs $23,306.85 over 5 years (net of residual value).
In this comparison, leasing saves $7,106.85 — but remember that after the lease ends you have no car, while after the loan is paid off you own the vehicle outright.
Key Factors Beyond the Numbers
The financial comparison is just one piece of the decision. Leasing lets you drive a new vehicle every 2-4 years with the latest safety and technology features, and most leased cars stay under factory warranty. However, leases come with mileage limits (typically 10,000-15,000 miles/year) and wear-and-tear charges.
Buying gives you the freedom to drive unlimited miles, customize the vehicle, and build equity. Once the loan is paid off, every year of ownership without a payment saves thousands compared to continuing to lease. For drivers who keep cars 7+ years, buying is almost always the more economical choice.
Frequently Asked Questions
What is the primary difference between leasing and buying a car?
When you buy, you own the vehicle outright after paying off the loan and build equity over time. When you lease, you pay to use the vehicle for a set term and return it at the end with no ownership. Buying has higher monthly payments but lower long-term costs, while leasing offers lower payments but no equity.
When is leasing a better deal than buying?
Leasing can be better if you prefer a new car every 2-4 years, want lower monthly payments, or drive predictable mileage. Businesses may benefit from lease tax deductions. In a 3-year comparison, leasing a $25,000 car at $450/mo costs $16,200 — less than the $23,307 total buy cost over 5 years.
When is buying a better deal than leasing?
Buying is typically better if you plan to keep the vehicle beyond 5 years, drive high mileage, or want to build equity. Once the loan is paid off, you have no monthly payment. Over 10 years, owning costs far less than continuously leasing.
How does residual value affect the comparison?
Residual value is the asset's estimated worth at the end of the loan term. A higher residual value reduces the total buy cost because you can sell or trade in the vehicle. For example, a $5,000 residual value reduces the buy cost from $28,307 to $23,307 in our default scenario.
What does the insights panel show?
The insights panel shows derived metrics like total interest paid on the loan and effective monthly cost for each option. This helps you see beyond the headline numbers — for example, that interest accounts for 11.7% of your total loan payments.