Car: Buy vs. Lease Calculator

The honest comparison — true total cost of buying versus leasing, including depreciation, opportunity cost, and what you own at the end.

Questions this answers — what you can actually figure out

Should I buy or lease my next car?
How much will buying cost me over 5 years versus leasing?
When does buying break even compared to leasing?
Will my mileage make a lease too expensive?
How much equity will I actually build by owning?
Is leasing cheaper if I always want a newer car?

Buying

Vehicle priceThe negotiated purchase price, not the MSRP sticker. Most buyers pay 3-8% below MSRP on new cars. Used cars are typically priced closer to market value.

Down paymentLarger down payments reduce monthly payments and total interest but increase the opportunity cost of capital. The money you put down could instead be invested.

Loan rate and termNew car loans average 6-7% in 2024. Credit unions often offer better rates than dealerships. Longer terms lower payments but significantly increase total interest paid.

Residual valueWhat the car is worth at the end of the model period as a percentage of purchase price. New cars lose roughly 20% in year one and 50% by year five per Edmunds data.

Vehicle purchase price $35,000

Down payment $5,000

Loan interest rate 6.5%

Loan term 60 mo

Residual value at end of period 45%

Annual maintenance cost $800/yr

Leasing

Cap cost reduction applies to first lease only. Renewals use payment + fees.

Cap cost reductionThe upfront payment on a lease (similar to a down payment). Many advisors recommend putting nothing down on a lease — if the car is stolen or totaled, you lose the cap cost reduction with no benefit.

Monthly lease paymentIncludes depreciation, finance charge (money factor), and fees. Does not include insurance or maintenance unless specified. Compare this against the true all-in monthly cost of buying.

Mileage allowanceMost leases allow 10,000-15,000 miles per year. Excess mileage fees typically run $0.15-$0.30 per mile. If you drive more than the allowance, leasing costs increase significantly.

Disposition feeA fee paid at lease end if you do not purchase or re-lease the vehicle. Typically $300-$500. Some manufacturers waive it if you lease again.

Cap cost reduction (upfront) $2,000

Monthly lease payment $450/mo

Lease term 36 mo

Annual miles driven 12,000/yr

Mileage allowance (per year) 12,000/yr

Excess mileage fee (per mile) $0.20/mi

Disposition fee (at lease end) $395

Shared assumptions

Annual insurance costLeased cars typically require more comprehensive coverage than owned cars, adding $200-$600/year. Enter the same amount for both, or a higher figure for leasing if your insurer charges more.

Years to modelFor a fair comparison, model the same period for both. For leasing, this covers multiple lease cycles if the period exceeds one term. For buying, this is how long you hold the car.

Investment returnThe opportunity cost rate applied to down payments and any monthly savings. Used to show what that capital could earn if invested instead of committed to a vehicle.

Annual insurance cost $1,600/yr

Years to model 5 yrs

Investment return (opportunity cost) 7.0%

Lower total cost over 5 years

True monthly cost breakdown

Buying

Loan payment (P+I)-

Insurance-

Maintenance-

Less: monthly equity built-

True monthly cost of buying-

Leasing

Lease payment-

Insurance-

Excess mileage (est.)-

True monthly cost of leasing-

Total cost - buying

all-in over period

Total cost - leasing

all-in over period

Net cost of buying

after resale value

Car value at end

resale / trade-in

Interest paid (model period)

cost of financing during modeled years

Break-even year

buying overtakes leasing

Cost per mile - buying

all-in net of resale

Cost per mile - leasing

all-in including fees

Opp. cost of down pmts

if invested instead

Chart view

Buying (net exposure)

Leasing

Why does buying dip below zero early? The line subtracts the car's current market value from cumulative costs paid. Early on the asset you own is worth more than what you've spent — a net gain. The line rises as the car depreciates and costs accumulate, crossing zero when costs exceed remaining value.

Frequently asked questions

Because a chunk of every loan payment goes to principal, not expense. The "true monthly cost of buying" subtracts the equity you're building from the cash going out the door. The lease payment, by contrast, is pure expense — nothing comes back at the end. Look at "net cost of buying" rather than just the monthly payment to see the apples-to-apples number.

Edmunds and Kelley Blue Book publish make/model-specific residuals. As a default: new cars lose ~20% in year one and ~50% by year five, so 5-year residual of 45-55% is typical. Luxury sedans and high-mileage daily drivers depreciate faster (35-40%); Toyotas, Hondas, and trucks hold value better (55-65%). Used cars have lower percentage depreciation but lower starting value.

Yes, as a separate line: the "Opp. cost of down pmts" KPI shows what the lump sums would have grown to at your chosen investment return if invested instead. Buying typically has a larger down payment than a lease cap cost reduction, so the opportunity cost usually favors leasing. It's a real cost, but it's a "would have earned" cost, not a "had to pay" cost — weigh it accordingly.

It's the strongest case for buying. Once your loan is paid off, you have several years of "free" car ownership — only insurance and maintenance. Perpetual leasing, by contrast, never stops paying. The 10-year scenario assumes the buyer keeps the car the whole time; the leaser keeps signing new leases. If you trade in every 3-4 years anyway, the 10-year math doesn't apply to you.

The buying line subtracts the car's current market value from cumulative cash paid. In the first year or two, the car is still worth more than what's been paid out of pocket, so net exposure is negative — you'd be money-ahead if you sold right then. The line rises as depreciation outpaces principal repayment, crossing zero when costs exceed remaining value.

Sales tax, registration, title fees, and dealer fees are excluded — they vary by state. Lease excess-wear charges, lease early-termination penalties, and gap insurance are not modeled. The calculator also assumes you can actually qualify for the loan rate and lease terms entered. Real lease offers often have stricter mileage caps for the lowest payments and may bake in dealer markups not visible to you.

Yes, for three real reasons the math can't capture. First, you always have a new car under warranty, so your repair risk is near zero. Second, the lower monthly payment can free up cash for higher-return investments (the calculator's opp-cost line gestures at this but doesn't model it fully). Third, business deductibility: if a self-employed person uses the car for business, the lease payment is fully deductible while the loan interest plus depreciation is more complicated. Talk to your accountant.

This calculator is for educational and informational purposes only. Results are estimates based on the inputs you provide and should not be taken as professional advice. Actual costs depend on specific vehicle, market conditions, credit score, insurer, and negotiated terms. Residual values are estimates — actual resale prices vary significantly by make, model, mileage, and condition. Always consult a qualified financial advisor before decisions involving major financial commitments. Sources: Edmunds for residual-value benchmarks, Experian Automotive for average loan rates, Kelley Blue Book for cost-of-ownership methodology.

Car: Buy vs. Lease Calculator

Frequently asked questions

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