How to use the lease vs buy calculator
- Enter the lease term in months; the comparison runs over exactly that period.
- Enter the lease offer: the monthly payment, everything due at signing and other fees such as acquisition and end-of-lease charges.
- Enter the loan offer: down payment, interest rate (APR) and loan term.
- Set depreciation rates to estimate what the car will be worth when the lease would end.
- Read which option is cheaper and by how much, then try different rates or terms.
How the comparison is worked out
Loan payment = P × r ÷ (1 − (1 + r)−n), with r = APR ÷ 12
Buy cost = down payment + payments made + loan balance left − car value
Car value = price × (1 − first-year %) × (1 − later-year %)years − 1
Selling the car at the end of the lease period, paying off the balance and keeping the difference puts the two options on equal terms. If you would keep the car for many years after that, buying usually looks better still, because you stop paying while still driving.
Worked example
A $35,000 car. Lease: $3,000 at signing, $450 a month for 36 months and $1,000 of fees. Loan: $5,000 down, 7% APR over 60 months. The car loses 20% in its first year and 15% a year after that:
- Lease total: $3,000 + 36 × $450 + $1,000 = $20,200.00.
- Loan payment on $30,000: $594.04 a month. After 36 payments, $13,267.85 is still owed and $4,653.15 of interest has been paid.
- Car value after 3 years: $35,000 × 0.80 × 0.85 × 0.85 = $20,230.00.
- Buying: $5,000 + payments made + balance − value = $19,423.15, so the cheaper option is Buying, by $776.85.
Tips before you sign
- Check the mileage limit. Leases charge for every mile or kilometre over the allowance; if you drive a lot, ask for a higher limit up front.
- Count every fee. Acquisition, disposition, documentation and excess wear charges all change the result.
- Negotiate the price either way. A lease payment is based on the car’s price too, so a lower price lowers both options.
- Ask for the APR. Compare loans by APR and total interest, not only by the monthly payment.
- Plan the end of the lease. Book an inspection before handing the car back, so you can repair small damage yourself instead of paying the leasing company’s rate.
- Read the contract. These are estimates; your lender’s documents are the final word.
US, UK and Canada differences
US leases are built from the car’s price, a residual value and a money factor, with acquisition and disposition fees, and many states tax each monthly payment. In the UK, Personal Contract Hire (PCH) is the equivalent of a lease, while Personal Contract Purchase (PCP) ends with an optional final payment to keep the car. Canadian leases work much like US ones, with sales tax usually charged on each payment.
Metric units and other countries
This calculator works in money and months only, so it fits any country. Where Islamic car finance (ijara or murabaha) is used, as in Pakistan and the Gulf, enter the bank’s profit rate as the APR for a like-for-like comparison, and confirm the exact figures with the bank.