Lease vs. Buy Calculator

Compare leasing and buying side by side. Enter the purchase price, monthly lease payment, interest rate, loan term, and residual value to see total costs for each option and which one saves you more money.
Luis GonzalezCreated by Luis GonzalezLast updated:

How to Use This Calculator

  1. 1

    Enter the purchase price

    Input the total cost to buy the asset outright if you were to finance it.

  2. 2

    Enter the monthly lease payment

    Input the fixed amount you would pay each month under the lease option.

  3. 3

    Set the lease term in years

    Specify how long the lease agreement lasts.

  4. 4

    Enter the annual interest rate for buying

    Provide the APR you would expect for a loan if purchasing the asset.

  5. 5

    Set the loan term in years

    Specify the total duration of the loan if buying.

  6. 6

    Enter the residual value

    Provide the estimated value of the asset at the end of the loan term.

  7. 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:

  1. 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)
  1. Total Buy Cost (net of residual value):
Total Buy Cost = (Monthly Payment × n) - Residual Value

Where:

  • Purchase Price is the total cost to buy the asset
  • Monthly Lease Payment is the fixed lease payment per month
  • Residual Value is 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.

💡 For a complete comparison including fuel and maintenance, try our EV vs. Gas Car Total Cost of Ownership Calculator.

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.

💡 Planning for long-term ownership costs? Use our Extended Warranty vs. Repair Risk Calculator to estimate future maintenance expenses.

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.