Lease vs. Buy Car Calculator

Compare the cost of leasing and buying a car using our lease vs. buy calculator below.

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This calculation is based on widely-accepted formulas for educational purposes only - this is not a recommendation for how to handle your finances, and it is not an offer to lend. Consult with a financial professional before making financial decisions.
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How to Compare the Costs of Leasing vs. Buying a Car

When evaluating the cost implications of leasing versus buying a vehicle, it’s crucial to look beyond the monthly payments and consider the broader financial impacts of each option.

Leasing a Car

A lease is essentially a long-term rental agreement offering the use of a vehicle for a set period, typically 2-4 years, in exchange for a monthly lease payment. The leasing company retains ownership of the vehicle, while you are paying only for the use of it during this time.

The upfront costs of a lease generally include the first month’s payment, any down payment or trade-in that may be included, a refundable security deposit, registration, and any other fees. If you have good credit, you may have the option to put no money down by rolling the upfront costs into the monthly lease payments.

The monthly lease payment is primarily determined by what your leased vehicle will be worth at the end of the lease, which is known as its residual value. This value is calculated by using a formula based on the capitalized cost of the vehicle, the car’s depreciation during the lease term, the number of miles it will be driven, any down payment and/or trade-in, and the money factor (comparable to the interest rate).

Buying a Car

When you buy a vehicle, you are purchasing the entire vehicle outright, either with cash or by financing it over time with an auto loan.

The upfront costs of buying a car include the down payment, any trade-in value from another vehicle, taxes, registration, and other fees. Buyers with good credit may be able to purchase with no money down by building all of these upfront costs into the monthly loan payments.

The monthly payment when buying a car is determined by the loan amount, the interest rate, and the loan term. When you have finished making all of the loan payments, you will own the vehicle and have the right to sell it if you wish.

Factors to Consider When Comparing Leasing to Purchasing

There are several factors to consider when making a leasing vs. buying decision on a new vehicle:


When you lease, you’re paying primarily for the vehicle’s pre-determined depreciation during the lease term, rather than the total cost of the vehicle. This typically means much lower monthly payments.

When you buy, however, you’re paying for the entire vehicle, including its depreciation. When you buy a car, it becomes an asset that you own, and its future value (which will ultimately depend on its mileage, condition, and unknowable market forces) is yours once the loan is paid off.


Leased vehicles typically have a maximum number of miles that can be driven during the lease term. You can adjust this number prior to lease signing based on your expected driving activity, but exceeding your limit will incur additional charges.

When you buy a vehicle, there are no mileage restrictions of this type. Of course, higher mileage will decrease the vehicle’s resale value due to increased wear and tear.

Maintenance and Repairs

When you lease a vehicle, the car typically remains under warranty for the entire lease term. When you buy a vehicle, you are responsible for all repairs that become necessary after the warranty expires. This can add greatly to the total cost of ownership.

Tax Implications

Tax laws tend to favor a leased car used for business over a purchased car, allowing you more generous deductions. In addition, many states charge you sales tax only on the lease payment, and not on the entire vehicle cost, which is what happens when you buy a vehicle. Consult your tax advisor for all the details that apply in your specific situation.

Long-Term Cost Considerations

Calculating the total cost for a lease involves adding up all of the lease payments, any end-of-lease fees, and any initial pre-signing costs. Serial leasing means that you will always have a lease payment.

The total cost of buying a car includes the down payment, taxes, all loan payments, and all out-of-pocket expenses for maintenance and repairs, minus any resale or trade-in value you may realize.

When comparing leasing versus buying, you should consider how long you typically keep a car, how much you drive, your tolerance for mechanical problems, and your financial priorities. Leasing can be more cost-effective in the short term and offers the chance to drive newer cars more frequently. It also gives you a vehicle that is always covered by a warranty, with no unexpected repair expenses.

Buying is generally less expensive in the long run, especially if you keep the vehicle for many years after the loan is paid off. But this also depends on the vehicle’s long-term reliability, which can be difficult to predict at the outset of your ownership experience.

Please note that this is not intended to be financial advice. You should consult with a financial advisor to get more personalized insights based on your individual financial goals and car usage patterns.