Car lease vs. buy calculator

How this calculator works

This calculator compares the estimated net cost of leasing versus buying the same vehicle over a comparison period you choose in months. For leasing, it totals the lease down payment, every monthly lease payment over the period, and the disposition fee charged when you return the vehicle without purchasing it.

For buying, it models the down payment on a loan that includes sales tax on the purchase price, monthly loan payments amortized over your loan term, and ongoing maintenance as a percentage of vehicle value each month. It tracks how much principal you pay down, estimates the vehicle's residual value after depreciation, and subtracts any remaining loan balance to compute buyer net position at the end of the period.

Net cost for each path reflects total cash paid minus ending value retained. For buyers, net cost equals total buy cash outflows minus buyer net position (residual value minus remaining loan balance). For lessees, net cost equals total lease payments with no equity retained. The option with lower net cost is labeled the lower estimated cost.

This is a financial comparison model, not a lifestyle recommendation. It does not include insurance premiums, registration fees, excess mileage charges, wear-and-tear penalties, gap coverage, or tax deductions from loan interest.

What affects the result

Several inputs interact. Small assumption changes often flip close comparisons.

• Comparison period matters because buying front-loads down payment and early loan interest while equity builds slowly. Short periods often favor leasing; longer periods may favor buying if depreciation is moderate and you retain meaningful residual value.
• Vehicle price and sales tax set the taxed purchase price for the buy path. Higher prices raise both loan principal and maintenance costs.
• Lease down payment, monthly payment, and disposition fee define total lease cost directly. A low advertised payment with a large disposition fee can erase apparent savings.
• Buy down payment, rate, and term drive monthly loan payment and how quickly you build equity. Longer terms lower the payment but slow principal paydown.
• Annual depreciation rate lowers estimated residual value at the end of the comparison. Faster depreciation raises buying net cost because you retain less value.
• Maintenance rate adds recurring ownership cost as a percentage of vehicle value. Higher rates favor leasing in the model when lease payments stay fixed.

Run conservative, base, and optimistic scenarios for depreciation and maintenance rather than trusting a single output.

Real-world examples

1. Three-year comparison on a $35,000 vehicle. Lease with $2,000 down, $399/month, and a $395 disposition fee vs. buy with $4,000 down, 7% APR over 5 years, 8% sales tax, 15% annual depreciation, and 1% maintenance. Over 36 months, one path often shows modestly lower net cost depending on residual value—test your market inputs rather than assuming a universal winner.

2. Short two-year keep. Limited equity buildup and depreciation frequently make leasing cheaper on net cost even when the monthly loan payment resembles the lease payment. Extend the comparison to four or five years to see when buying may catch up.

3. High-depreciation vehicle. A 20% annual depreciation rate on a $45,000 SUV sharply reduces residual value—shifting net cost toward leasing if lease payments are competitive.

4. Low-mileage lease with buyout option. If you plan to purchase the vehicle at lease end, this model treats the comparison as lease-through vs. buy-from-start. Add the buyout price to lease costs manually when evaluating that path—the calculator models return-at-end leasing only.

Common mistakes

• Comparing monthly lease payment to loan payment only. Ownership includes maintenance, depreciation, and the opportunity cost of a larger down payment.
• Ignoring disposition and acquisition fees. End-of-lease charges and upfront lease fees materially change total lease cost.
• Using unrealistic depreciation. New vehicles often lose 15–20% in the first year and 10–15% annually thereafter in many segments, but trucks and EVs vary widely.
• Choosing too short a horizon for a long-term keeper. A lease win on net cost may not matter if you typically drive vehicles eight to ten years.
• Forgetting insurance differences. Lease contracts may require higher coverage limits, raising premiums beyond what this model shows.
• Assuming zero maintenance on a purchase. Even new cars need tires, oil changes, and repairs over time.

When to use this calculator

Use this calculator when deciding between a lease offer and a purchase loan on the same vehicle at a stated price. It fits evaluating a dealer lease special against credit-union financing, comparing how long you plan to keep the car, and stress-testing depreciation assumptions before signing.

Pair with the auto loan calculator to verify financed amount and amortization on the purchase path, and the loan payment calculator for general payment math. Read the auto loan payment explained guide for how principal, interest, and term interact.

Frequently asked questions

Does this calculator include sales tax on a lease? Lease tax treatment varies by state—some tax the monthly payment, others tax the full vehicle value upfront. This model applies sales tax to the purchase price on the buy path only. If your state taxes lease payments, include that effect in the monthly lease payment you enter.

What depreciation rate should I use? A common planning input for mainstream sedans and crossovers is 12–15% per year after the first year, with a steeper drop in year one. Luxury brands, trucks, and electric vehicles deviate. Check historical resale values for the make and model you are considering, then test a range of rates.

Why does buyer net position matter? When you sell or trade a purchased vehicle, you receive roughly its market value minus what you still owe. Buyer net position estimates that ending equity. Lower residual value or a high remaining loan balance reduces net position and raises buying net cost.

Does a buy recommendation mean I should purchase? No. Leasing offers lower monthly payments, warranty coverage during the term, and simpler turnover when you prefer a new vehicle every few years. A modest cost advantage for buying may not outweigh flexibility if your driving needs or job stability may change.

How reliable is the output for making a real decision? The calculator is a planning tool, not a prediction. Small differences in depreciation, maintenance, or lease fees can flip a close comparison. Treat the result as directional—a guide to which path is more likely to cost less under your assumptions—rather than a precise dollar forecast.

Related calculators

Verify the purchase loan payment and amortization schedule with the auto loan calculator. Break down principal and interest on any loan amount with the loan payment calculator. Compare total borrowing cost across different APRs and terms before visiting the dealer. For broader loan comparison workflows, see the loan comparison calculator.