$35,000 car: $450 lease for 36 months vs $5,000 down and 6.5% over 60 months, 60% resale
Buying costs about $892 less over 36 months.
Lease vs buy calculator
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Both options are compared over the lease term. Buying counts the down payment and loan payments made, then subtracts what the car would sell for minus the loan still owed. Insurance, maintenance, sales tax and mileage fees are left out because they are similar or depend on the deal.
35 thousand
Lease term
3 thousand
5 thousand
%
Loan term
% of price
Buying costs less
$892
Over 36 months, leasing costs $19,200. Buying costs $18,308 once you sell the car for $21,000 and pay off the $13,177 still owed.
- Lease, total cost
- $19,200
- Buy, net cost
- $18,308
- Loan payment a month
- $587
- Car value at the end
- $21,000
Year 0Year 18Year 36
Lease$19,200
Buy$18,308
Comparing a lease with a loan, fairly
A lease payment is almost always lower than a loan payment for the same car, so leasing looks cheaper. The fair test compares what each choice costs you over the same stretch of time, and counts the car you own at the end if you buy.
Take a $35,000 car. A 36-month lease at $450 a month with $3,000 due at signing costs $19,200. Buying with $5,000 down and a 60-month loan at 6.5% means payments of $586.98. After 36 months you have paid $26,131 including the down payment and still owe $13,177. If the car is worth 60% of its price, $21,000, selling it would leave a net cost of $18,308, about $892 less than leasing.
The answer turns on resale value. If the car is worth only 50% of its price after three years, buying costs $21,808, and the lease comes out ahead by about $2,608. Check the resale value of similar three-year-old cars before you decide.
Time matters too. If you keep a bought car for seven or eight years, the later years have no payments at all, which is where buying usually wins clearly. Leasing suits people who want a new car every few years and drive within the mileage limit.
Sources
What this calculator does not account for
- Insurance, maintenance and mileage charges are left out.
- Resale value is your estimate.
How this is calculated
Formula: Lease against buy over the lease term
lease cost =due at signing + payment × months; buy cost =down payment + loan payments + loan still owed − car valueWhat the symbols mean
- car valueWhat the car would sell for at the end of the lease.
- loan still owedThe balance left on the car loan after the same number of months.
Good to know
- Buying gets cheaper the longer you keep the car, because payments stop and the car is still worth something.
- Mileage limits and wear charges on a lease can add to its cost.
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Worked examples
Each example is worked out by the same code as the calculator above.
Same, with 50% resale
Leasing costs about $2,608 less.
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<iframe src="/embed/lease-vs-buy-calculator" title="Lease vs buy" width="100%" height="720" style="border:0;max-width:42rem" loading="lazy"></iframe>Questions
Is it cheaper to lease or buy a car?
Over the first few years it is often close. Buying usually wins if you keep the car longer than the loan, because payments stop while the car still has value.
What happens at the end of a lease?
You hand the car back, buy it for the residual value, or lease a new one. You own nothing unless you buy it.
How much does a car lose in value in 3 years?
Often 35% to 50%, depending on the model. Enter your own estimate for the value at the end of the lease.
When does leasing make sense?
If you want a new car every few years, drive within the mileage limit and value a low payment more than long-term cost.
Does this include insurance and maintenance?
No. Both are similar for either choice, though leases often need fuller insurance cover.