How to use this calculator
Begin by entering the lease details on the left side: the vehicle price, down payment (cap cost reduction), monthly lease payment, lease term in months, and any fees such as the acquisition fee and disposition fee. If you expect to exceed the mileage allowance, enter the annual mileage limit and per mile overage charge as well.
On the buy side, enter the vehicle purchase price, your down payment, loan interest rate, and loan term. The calculator will compute your monthly loan payment and total cost of ownership over the same period as the lease term so you get a fair comparison.
The results display the total cost for each option and the break even resale value. If you can sell or trade in the purchased vehicle for more than the break even amount, buying is the cheaper choice. If the car will be worth less than that number, leasing costs less overall.
Key factors in the lease vs. buy decision
The most important variable is how long you plan to keep the vehicle. Leasing works best for drivers who want a new car every two to three years and prefer predictable monthly costs. Buying makes more financial sense if you plan to keep the vehicle for five years or longer, because once the loan is paid off you drive payment free while the car still has value.
Depreciation drives the math behind both options. A new car loses roughly 20% of its value in the first year and about 15% each year after that. Lease payments are essentially paying for that depreciation plus interest. When you buy, you absorb the same depreciation but retain the residual value as equity you can recover at sale or trade in.
Frequently asked questions
Is it cheaper to lease or buy a car?
It depends on your situation. Leasing has lower monthly payments but you never own anything. Buying costs more per month but builds equity. If you keep cars more than 5 years, buying almost always wins financially.
What is included in total lease cost?
Total lease cost includes all monthly payments, down payment, acquisition fee, disposition fee, excess mileage charges, and wear and tear fees. Do not forget sales tax, which is charged on each monthly payment in most states.
How do I calculate break-even resale value?
The break-even resale value is what you would need to sell the purchased car for to make buying cost exactly the same as leasing. If the car is worth more than that number, buying wins.
Should I put money down on a lease?
Generally no. If the car is totaled early in the lease, you lose your down payment. It only reduces your monthly payment but does not save you money overall. Keep down payments minimal on leases.
What happens if I exceed the mileage limit?
You pay $0.15 to $0.30 per mile over the allowance at lease end. Track your mileage throughout the lease. If you are going over, consider buying extra miles upfront or purchasing the car at lease end.