What is the Car Lease vs Buy?
Leasing pays for the car's depreciation over the lease term plus a finance charge — you hand it back at the end owning nothing. Buying costs more monthly but leaves you with an asset that still has resale value.
The honest comparison subtracts the car's resale value from the buying cost. Once you do that, buying usually wins for anyone keeping a car beyond the loan term.
Formula & worked example
Lease cost = lease down payment + total lease payments
Resale = Price × (1 − depreciation)years
Worked example: a $35,000 car with $7,000 down at 7% over 4 years costs $7,000 + $27,462 = $34,462, but is still worth about $17,425 — a net cost of $21,758. Leasing at $450 a month with $2,500 down costs $24,100 with nothing to show at the end. Buying saves about $2,342 — and the gap widens sharply every year you keep the car after the loan is paid off.
How to use this car lease vs buy calculator
- Enter the car price and your down payment for the buying option.
- Enter the lease payment and any upfront lease cost.
- Set how long you will realistically keep the car.
- Use 15–20% annual depreciation for most mainstream cars.
Smart tips
- Buying almost always wins if you keep the car beyond the loan term — the years after payoff are nearly free.
- Leasing makes sense if you want a new car every 2–3 years, drive predictable mileage, or can deduct it as a business expense.
- Watch lease mileage limits; excess charges of 15–25 cents per mile add up fast.
- Lease "wear and tear" charges at return are a common unpleasant surprise — inspect early.
- Depreciation is the single largest cost of car ownership, whichever route you choose.
Frequently asked questions
Is leasing or buying cheaper?
Buying is usually cheaper over the long run because you retain resale value. Leasing costs less monthly but you own nothing at the end.
When does leasing make sense?
If you want a new car every few years, drive predictable mileage, value warranty coverage, or can write it off as a business expense.
What is a good depreciation rate to assume?
15–20% a year for mainstream cars. Luxury vehicles often depreciate faster; some trucks and hybrids hold value better.
Can I buy the car at the end of a lease?
Usually yes, at the residual value set in the contract. If the market value exceeds the residual, buying it out can be a genuine bargain.
Want the theory behind the numbers? Read our car buying guides on the Money Blog.