BuildCalc Pro

Lease vs Buy Calculator

Compare the true cost of leasing versus buying a vehicle over time. Factor in loan payments, depreciation, insurance, maintenance, and residual value.

Buying

Leasing

How to Use This Calculator

1. Enter the vehicle price and your buying terms (down payment, rate, loan length). 2. Enter the lease terms (monthly payment, down payment, lease length). 3. Set annual insurance costs for both options and maintenance budget. 4. Enter the expected annual depreciation rate (typically 15-20%). 5. Choose how many years to compare, then click Calculate.

Key Formulas

Monthly Loan Payment

P × [r(1+r)^n] / [(1+r)^n – 1]

P = loan amount, r = monthly rate, n = loan term in months.

Depreciated Value

Price × (1 – annual depreciation rate)^years

Estimates vehicle value after accounting for annual depreciation.

Total Cost of Ownership

Payments + Insurance + Maintenance – Resale Value

Net cost after subtracting what you get back when selling.

Lease vs Buy: Which Option Actually Saves You Money?

The lease vs buy decision depends on how long you plan to keep the vehicle, how many miles you drive, and whether you value lower monthly payments or long-term ownership savings. On average, buying and keeping a vehicle 7+ years is the cheapest option.

Leasing offers lower monthly payments (typically 30–40% less than loan payments), a new car every 2–3 years, and warranty coverage for the entire term. However, you build zero equity, face mileage restrictions (typically 10,000–15,000 miles/year), and pay disposition fees ($300–$500) at lease end.

Buying has higher monthly payments but you own the vehicle outright after the loan is paid. A car purchased for $35,000 with a 5-year loan will cost you nothing in payments for years 6+, while a leaser continues paying indefinitely.

Depreciation is the biggest cost of vehicle ownership. A new car loses 20–25% of its value in the first year and roughly 15% per year after that. After 5 years, a $35,000 vehicle is worth approximately $12,000–$15,000.

The total 5-year cost comparison often favors buying by $3,000–$8,000 when you factor in the residual value of the owned vehicle. The gap widens to $10,000–$20,000+ over 7–10 years since the buyer has no payments after the loan ends.

Frequently Asked Questions

Is leasing a car a waste of money?

Not necessarily. Leasing makes sense if you drive fewer than 12,000 miles/year, want a new car every 2–3 years, value having warranty coverage, or can write off the lease as a business expense. It wastes money if you plan to keep vehicles long-term.

What is a residual value on a lease?

The residual value is the predicted value of the vehicle at lease end, expressed as a percentage of MSRP. A 55% residual on a $35,000 car means the vehicle is expected to be worth $19,250 after the lease. Higher residual = lower monthly payment.

How many years until buying is cheaper?

Buying typically becomes cheaper than continuous leasing after 4–5 years, once the auto loan is paid off. From that point forward, you have no payments while a leaser starts a new lease. The savings compound the longer you keep the purchased vehicle.

Should I buy my leased car at the end?

Buy your leased car if its market value exceeds the buyout price, you want to avoid mileage or wear-and-tear penalties, or you like the car and it is in good condition. Skip the buyout if you can find a better deal elsewhere or the car has known issues.