Should you lease or buy your next car? This calculator compares total costs over time, factoring in monthly payments, down payments, depreciation, and equity. See which option saves you more money in the long run.
The lease vs. buy decision is one of the most consequential personal finance choices car buyers make — and one of the most confusing. Leasing typically offers lower monthly payments and easier vehicle turnover, while buying builds equity and produces lower long-term costs. The "right" answer depends on factors that have nothing to do with the calculator: how long you keep vehicles, how many miles you drive, whether you can deduct business use, and whether you value financial efficiency or convenience and predictability.
The basic economics: leasing pays for vehicle depreciation during the lease term (typically the steepest-loss years) plus finance charges. Buying pays for the full vehicle plus financing, but builds equity you can later recover by selling. Over a 3-year horizon, leasing often costs $2,000-$5,000 less than a 5-year purchase, but leaves you with nothing while the purchaser has $15K-$25K of equity. Over a 7-10 year horizon, buying is dramatically cheaper because you stop paying after the loan is paid off, while serial leasing means perpetual monthly payments.
This calculator compares both scenarios over your chosen horizon, accounting for monthly payments, down payments, accumulated equity (if buying), and disposition charges (if leasing). Use it to: model your specific vehicle and usage pattern, compare specific lease offers to financing equivalents, and identify which financial path best fits your actual ownership style. Important: the calculator captures the financial dimension. Many buyers correctly choose the "worse" financial option for non-financial reasons (always wanting a new car, avoiding maintenance hassle, business tax treatment). Both decisions can be right for different people — but make the decision with eyes open about the actual cost.
Buyer who always wants a new car every 3 years. Currently driving 10K miles/year. $35K mid-tier sedan. Over 9 years: - 3 consecutive leases at $350/month + $2K down each + $500 disposition = $45,300 total - 3 consecutive 36-month financing cycles: complex math but ends up ~$50K-$55K with full depreciation and trade-in losses each cycle - Single 9-year purchase: ~$35K total cost but driving same car for 9 years (not desired) For a confirmed every-3-years trader, leasing is financially competitive AND avoids ownership/sales hassle. Leasing wins. Caveat: this only works if the buyer truly trades every 3 years (most don't — research shows about 60% of leasers extend leases or buy out at end, undoing the lease advantage).
Buyer who keeps cars 10 years. $35K Toyota RAV4. 12K miles/year. 10-year buy: $35K + financing + maintenance = ~$45K total. Vehicle worth $10K at year 10. Net cost: ~$35K. 10-year leasing (3 consecutive 36-month leases + 1 year overage): ~$15K per cycle × 3 + extra year = $50K+ total. No asset at end. Buying saves $15K+ over 10 years for a long-term keeper. Plus: no monthly payment for the last 5+ years after loan is paid off. Plus: ownership flexibility (modify, sell anytime, no mileage anxiety). For confirmed long-term keepers, buying dominates. Annual cost of ownership: $4,500/year buying vs. $5,500/year leasing — and the gap grows in years 6-10.
Self-employed consultant driving 18K miles/year, 90% business use. $40K SUV. Lease deduction: 90% of total lease payments ($400 × 36 × 0.9 = $12,960 over 3 years). Purchase deduction: limited by IRS luxury auto depreciation caps (~$11,200 first year with bonus, then $19,200 over next 4 years for "passenger auto" = ~$30K of $40K deductible over 5 years). Plus: 18K miles/year exceeds typical lease allowance (12K-15K) — would require paying for high-mileage upfront ($1K-$2K extra over lease term). Adjusted analysis often favors lease for high-business-use scenarios due to deduction simplicity and full deductibility within lease term. Verify with tax accountant — Section 179 and bonus depreciation rules change frequently. Personal use vehicles get NO deduction either way — the lease advantage applies only to business use.
Use this calculator when shopping for a vehicle and deciding between leasing and financing, when comparing specific lease offers to purchase equivalents, or when assessing your historical car ownership pattern to identify which approach matches your reality.
Pair with car-lease (detailed lease payment calculation), auto-loan (purchase financing math), and car-depreciation (long-term value modeling).
Important lease-vs-buy considerations:
1. **Time horizon dominates.** Short horizon (≤3 years) → leasing often competitive. Long horizon (≥5-7 years) → buying dramatically cheaper. Be honest about your actual ownership pattern, not your aspirational one.
2. **Be honest about trade frequency.** Surveys show ~60% of leasers extend, buy out, or break the lease — undoing the lease economics. If you historically keep cars 6+ years, buying is your right answer regardless of what feels appealing.
3. **Mileage matters enormously.** 12K-15K/year fits typical leases. 18K+/year produces $2K-$5K in excess mileage charges per lease cycle. Heavy drivers should buy.
4. **Tax treatment differs.** Business-use vehicles often favor leasing due to full deductibility within lease term. Personal vehicles get no deduction regardless of structure. Consult tax professional for business-use scenarios.
5. **Don't put large down payments on leases.** If totaled or stolen, insurance pays the lender — not you. Lease down payment is lost. Keep lease down to minimum required.
6. **Compare apples-to-apples on monthly payment.** Lease payment doesn't include maintenance, insurance, or excess mileage. Purchase doesn't include maintenance after warranty. Add expected maintenance to both for fair comparison.
7. **Equity value at lease end is zero.** Lease buyout option exists but usually at residual value (sometimes above market). Buying equity at lease end is rare and rarely advantageous.
8. **Insurance often higher for leases.** Lenders require higher coverage (lower deductibles, broader coverage). Add $200-$500/year to lease cost for insurance differential.
9. **Vehicle category matters.** Leasing works best for fast-depreciating vehicles (luxury sedans where residuals are subsidized). Buying works best for slow-depreciating vehicles (Toyota/Honda mass-market, trucks).
10. **Lease appeals for psychological reasons too.** Some buyers value predictable monthly cost, no maintenance worry after warranty, and ability to upgrade frequently. These are valid but distinct from financial efficiency.
11. **The "third path": buy used and hold long.** Often the most economical car ownership pattern — neither pure new-purchase nor pure leasing. 3-5 year-old vehicles, held 7-10 years, with the original buyer having absorbed the steepest depreciation.
Calculate your monthly car payment and total loan cost including trade-in and sales tax.
Calculate car lease payments using capitalized cost, residual value, and money factor.
Estimate how much your car loses in value each year.
Compare fuel costs between vehicles by MPG, gas price, and annual miles driven.
See how extra payments help you pay off your car loan faster.
Calculate savings from refinancing your auto loan to a lower interest rate.
Percent of MSRP at lease end
Verdict
Leasing is better
Monthly Loan Payment
$628.07
Car Value at End
$19,250.00
Buy Equity at End
$19,250.00
| Year | Lease Total | Buy Total | Car Value | Buy Equity |
|---|---|---|---|---|
| 1 | $6,200.00 | $12,536.88 | $29,750.00 | $3,265.72 |
| 2 | $10,400.00 | $20,073.76 | $25,287.50 | $4,795.04 |
| 3 | $14,600.00 | $27,610.64 | $21,494.38 | $7,395.02 |
| 4 | $14,600.00 | $35,147.52 | $18,270.22 | $10,992.13 |
| 5 | $14,600.00 | $42,684.40 | $15,529.69 | $15,529.69 |