Buy vs. Lease Calculator

Lease or Buy a Car Calculator

Compare monthly payments and total Net Cost for buying with a loan vs. leasing, including taxes, fees, depreciation, and opportunity cost.
Buy option
Loan amount
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Monthly payment (with tax in loan)
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Lease option
Monthly lease payment (incl. tax)
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How the lease payment is calculated
Payment = Depreciation/term + Finance charge.
Depreciation = (Cap cost − Residual). Finance = (Cap cost + Residual) × Money Factor.
Money Factor = APR / 2400. Sales tax is applied to the monthly payment.
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Net Cost of Buying (to lease horizon)
Total loan payments
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Lost interest on upfront
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Ending loan balance
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Upfront (down + fees)
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Market value @ lease end
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Net Cost (buy)
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Net Cost of Leasing
Total lease payments
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Upfront (down + fees)
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Lost interest (incl. deposit)
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Net Cost (lease)
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Adjust inputs and click Calculate.
Formulas: Net Cost (buy) = upfront + lost interest + loan payments to lease horizon + ending balance − market value. Net Cost (lease) = upfront + total lease payments + lost interest. Security deposit only affects opportunity cost because it’s refunded.

What is a Buy vs. Lease Calculator?

The Buy vs. Lease Calculator is a tool that helps you compare the costs of purchasing a car with a loan versus leasing it. It accounts for monthly payments, taxes, fees, depreciation, residual value, and the opportunity cost of your upfront payments. In other words, it shows you which option is financially better over the same time horizon.

How can you use the Buy vs. Lease Calculator?

When you are considering getting a new car, you usually face two options: buy or lease. This calculator helps you decide by providing:

  • A comparison of monthly payments for buying and leasing.

  • The Net Cost of each option, showing the true expense after factoring in taxes and depreciation.

  • A clear verdict on which choice is cheaper over the lease term.

What is a good outcome?

There is no universal answer. Buying is often better if you plan to keep the car long-term, while leasing may be cheaper if residual values are high or if you prefer lower upfront costs. The calculator highlights the exact difference in Net Cost so you can make a data-driven decision.

How to calculate Net Cost

The formulas behind the calculator are as follows:

For buying

\[
\text{Net Cost}_{buy} = \text{Upfront} + \text{Lost Interest} + \text{Loan Payments (to lease horizon)} + \text{Ending Balance} – \text{Market Value}
\]

For leasing

\[
\text{Net Cost}_{\text{lease}} =
\text{Upfront} + \text{Total Lease Payments} + \text{Lost Interest}
\]

Where:

  • Upfront = down payment + fees

  • Lost Interest = opportunity cost of upfront money

  • Market Value = purchase price × (1 − depreciation)^(months ÷ 12)

  • Lease Payment = ( (Cap Cost − Residual) ÷ Term + (Cap Cost + Residual) × Money Factor ) × (1 + Tax Rate)

  • Money Factor = APR ÷ 2400

Example

Let’s assume the following:

  • Car price: $20,000

  • Down payment: $1,000

  • Loan: 60 months, 8% APR

  • Lease: 24 months, 8% APR, 60% residual, $500 deposit

Results:

  • Monthly loan payment ≈ $409

  • Monthly lease payment ≈ $423

  • Net Cost (buy, 24 months) ≈ $11,245

  • Net Cost (lease, 24 months) ≈ $11,495

➡ Buying is cheaper by about $250 in this scenario.

FAQs

Why is lost interest included?

Because any upfront payment or deposit could have been invested, the calculator adds the cost of the missed return.

Why is sales tax applied differently?

When buying, tax is applied to the full purchase price. In leasing, tax is applied only to monthly payments.

Does the calculator include insurance and maintenance?

No. These vary by driver and should be considered separately.

When is leasing better?

Leasing may be cheaper if the residual value is high, the lease APR is low, or you want flexibility without owning the car long-term.