Lease vs Buy Calculator (car, total cost over hold period)
Enter the price, down payment, and how long you'll keep the car. Plug in lease terms (monthly + length) and finance terms (APR + loan length + expected resale value). The calculator computes total cost of each option over your hold period โ including remaining loan balance and resale recovery for the buy side.
Total lease cost
CheaperNet buy cost
How buy total is calculated
- Cash out (down + payments during hold)
- $26,385
- Remaining loan balance at end of hold
- $13,268
- Resale value recovered
- โ$19,250
- Difference
- Leasing saves $4,203
How it works
Why hold period dominates the answer
Lease economics are roughly flat with time โ you pay the same rate per month indefinitely. Buying is back-loaded value: the first year you lose 15-20% to depreciation, but if you keep the car 6-10 years, the per-year cost drops dramatically as the loan finishes and depreciation slows. The break-even is typically around 4-5 years.
When leasing makes sense
Leasing is the cheaper option when you genuinely turn cars over every 2-3 years, want a newer model with full warranty coverage, or run a business that can write off the lease as an operating expense. The certainty of fixed monthly costs (no surprise repairs) has real value if you hate negotiating used-car sales.
Hidden costs of leasing
Mileage caps (typically 10-15k/year) trigger per-mile charges over the limit ($0.15-0.30/mile). Wear-and-tear charges at lease end can run hundreds to thousands. Most leases require gap insurance and full coverage. Early termination is usually expensive. Build a buffer of 5-10% over the headline lease cost.
Frequently asked questions
โบWhat's the simplest rule?
Plan to keep <3 years and care more about a new car than money saved? Lease. Plan to keep 5+ years? Buy. The 3-5 year window is where this calculator earns its keep โ run the numbers.
โบHow accurate is the resale value estimate?
55% of price after 3-5 years is typical for mainstream cars. Trucks and Toyota/Honda hold 60-70%. Luxury sedans and EVs often drop to 40%. Check Kelley Blue Book or Edmunds for your specific model and year โ small percentage points swing the answer significantly.
โบWhy does the calculator favor buying for long holds?
Once the loan is paid off, monthly cash flow drops to $0 (just maintenance and insurance). Leasing payments continue indefinitely. After year 6-7 of ownership, every additional year is essentially 'free' minus the slow depreciation.
โบShould I include maintenance and insurance?
Maintenance differs: leases typically cover scheduled service in years 1-3 of warranty, buying means you pay or extend warranty. Insurance is usually similar but leases require full coverage with low deductibles. For ballpark math, both add roughly equal cost on either side.
โบWhat about the 'opportunity cost' of the down payment?
If you'd otherwise invest the down payment, that's a real cost on the buy side. At 7% market return over 5 years, a $5,000 down payment 'costs' about $2,000 in foregone returns. The calculator doesn't model this โ adjust your decision if it matters.
โบDoes this work for business car decisions?
Partially. Tax treatment differs โ leases are usually fully deductible as operating expense, buying allows depreciation deduction (Section 179 in US can accelerate this). Consult a tax pro; the answer can flip for business buyers.
โบWhat about EV-specific factors?
EVs depreciate faster than ICE cars in many markets due to battery degradation fears and tech obsolescence. A 3-year-old EV often resells at 35-45% of MSRP vs 55-65% for an equivalent ICE. This pushes EVs toward leasing in many cases.
โบShould I just buy used and skip both?
Often the right answer mathematically. A 2-3 year old car has absorbed the steepest depreciation curve. If you finance a used car at a reasonable rate and keep it 5+ years, you'll usually beat both new-car options by a wide margin.
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