About this calculator
Leasing and buying are not two prices for the same thing. A lease payment buys the right to use a new car for a few years: it covers the slice of value the car loses during the lease, plus interest and fees, and at the end the car goes back. A loan payment buys the car itself: early payments are mostly interest, but once the loan is paid off you own an asset you can sell — and every year after that, owning costs only insurance and maintenance.
That is why the monthly numbers mislead. A lease payment is almost always lower than a loan payment for the same car, yet leasing can still cost more over time: lease payments never stop, each new lease charges due-at-signing money again plus a disposition fee, and you never get a resale value back. This calculator compares the two paths as total net costs over the same horizon — everything paid, minus what buying gives back when you sell — so the monthly equivalents and the year-by-year table show when, if ever, buying pulls ahead.
How to use it
- Enter the car price, down payment, loan rate and term for the buying path, plus how fast the car loses value each year.
- Enter the lease terms: monthly payment, amount due at signing, lease length and disposition fee.
- Add the shared costs — insurance and maintenance per year — and any miles you expect to drive over the allowance, with the per-mile overage rate.
- Set how long you keep the car, then read the cheaper path first and the table second: if the table shows buying behind at your horizon, leasing wins on the numbers.
The formula
The loan payment uses the standard amortization formula: P is the loan amount, r the monthly rate and n the number of payments; payments stop once the term ends. Resale value falls by the depreciation rate each year and is never negative. The amount buying gives back at year H is the resale value minus whatever loan balance is still owed — you must clear the loan to transfer the title — which is why buying only looks cheap once the loan is mostly paid down. Leasing costs repeat every cycle: a new due-at-signing at each cycle start and a disposition fee at each cycle end.
Worked example
A $35,000 car with 10% down ($3,500) financed at 6.9% over 5 years costs $622.25 a month. Over 6 years of ownership you pay $37,335.16 in loan payments plus $10,800 insurance and $4,800 maintenance — $56,435.16 in cash — and sell the car for $13,200.23, so buying costs $43,234.93 net, or $600.49 a month. Leasing at $450 a month with $3,000 due at signing on a 3-year term and a $400 disposition fee costs $19,600 per 3-year cycle, $39,200 over 6 years, or $544.44 a month — leasing wins by $4,034.93 at these assumptions. But change depreciation from 15% to 10% a year and the resale value rises to $18,600.44, cutting buying's net cost to $37,834.72 — now buying wins by $1,365.28. That swing is exactly why the depreciation assumption deserves a second look before you decide.
Frequently asked questions
Why is the lease payment lower but leasing more expensive in the long run?
Because the two payments buy different things. A lease payment only covers the value the car loses during the lease plus interest and fees, so it starts low; a loan payment also builds equity, so it starts higher. Over a long horizon the difference compounds: the loan ends after its term and later years cost only insurance and maintenance, while lease payments restart every cycle with fresh due-at-signing money and a disposition fee — and the lessee never gets a resale value back.
Which assumption moves the answer most?
Resale value, by far — which means the depreciation rate. At the defaults, cutting depreciation from 15% to 10% a year lifts the 6-year resale value from $13,200.23 to $18,600.44 and flips the winner from leasing (by $4,034.93) to buying (by $1,365.28). Horizon is second: short horizons favor leasing because buying has barely built equity, while long horizons favor buying because the loan ends and the car keeps serving. Always re-run with a pessimistic resale value before deciding.
Leases usually require full-coverage insurance. Does this calculator handle that?
Partly. The tool uses one shared insurance input for both paths, which keeps the comparison simple but does not model a lease-only insurance uplift: leases typically require comprehensive and collision coverage and sometimes higher liability limits than an owner would carry. If your lease quote requires coverage that costs more per year than you would carry as an owner, leasing's true total is higher by that annual difference times the number of years — add it to the leasing total when comparing.
How do excess mileage fees work?
The lease sets an annual mileage allowance (commonly 10,000–12,000 miles). Miles driven beyond it are billed at the contract overage rate, typically around $0.25 per mile, when the car is returned at the end of each lease cycle. This calculator charges them evenly per year: excess miles per year times the overage rate. For example, 5,000 excess miles a year at $0.25 adds $1,250 a year — $7,500 over 6 years — which alone flips the default case from leasing winning by $4,034.93 to buying winning by $3,465.07.
What formula does this car lease vs buy calculator use?
Monthly loan payment = P·r ÷ (1 − (1+r)^−n); Total buying (year H) = down payment + loan payments to H + (insurance + maintenance) × H − max(0, resale value at H − loan balance at H); Total leasing (year H) = sum over each year of (monthly × 12 + due at signing at each cycle start + disposition fee at each cycle end + excess miles × overage rate) The loan payment uses the standard amortization formula: P is the loan amount, r the monthly rate and n the number of payments; payments stop once the term ends. Resale value falls by the depreciation rate each year and is never negative. The amount buying gives back at year H is the resale value minus whatever loan balance is still owed — you must clear the loan to transfer the title — which is why buying only looks cheap once the loan is mostly paid down. Leasing costs repeat every cycle: a new due-at-signing at each cycle start and a disposition fee at each cycle end. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.