What this calculator does
Find out whether leasing or buying a car costs you less over the years you'll drive it. The calculator compares two ways of having a car for the same stretch of time. In one, you lease. You return the car at the end of each lease and start a new one on the same terms. In the other, you buy with a loan, keep the car and sell it at the end. It adds up what each path costs you. The car you still own counts as money back. Then it shows which path costs less.
Lease payments are usually lower than loan payments for the same car. That makes leasing look cheaper month to month. But a loan ends, and the car keeps some value. Lease payments and signing costs keep coming back for as long as you lease. So the answer depends a lot on how long you plan to drive. That's why the calculator shows the cost year by year, as well as at the end.
Where it's used
Why this math matters outside the classroom:
- Choosing a car deal. A buyer compares a $450 lease with a $654.49 loan payment and finds buying costs about $8,121 less over six years.
- Short-term needs. Someone relocating in three years sees that leasing is about $1,665 cheaper over that shorter period.
- Fleet budgeting. A small business compares leasing delivery vans every three years with buying and running them for six.
- Decay models. Students model a car's value as 35,000 × 0.85^t and find it falls below half the price after 5 years.
- Reading residuals. A shopper turns a 58% residual after 3 years into a yearly rate by solving (1 − d)^3 = 0.58, so d ≈ 16.6%.
Grade level and standards: Grades 11–12; Common Core State Standards for Mathematics HSA.SSE.B.4, HSF.LE.A.1.c. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.
How to use it
- Enter how many years you want to compare.
- For buying, enter the price, sales tax, down payment, loan rate and loan term. Also enter how much value the car loses each year.
- For leasing, enter the monthly payment, the amount due at signing, the lease length and the fee when you return the car.
- Read the savings from buying (a negative number means leasing is cheaper). Then check the year when buying pulls ahead.
What the inputs mean
- Years to compare
- Comparing over one lease usually favors leasing. Comparing over the years you'd really keep a car usually favors buying. Try both.
- Sales tax on the purchase
- Added to the purchase price and borrowed along with it. Any lease tax is assumed to be included in the lease payment you enter.
- Value lost per year
- Depreciation is the value a car loses as it ages. The calculator assumes the car loses this percentage of its remaining value each year. A rate of 15% leaves about 44% of the price after 5 years.
- Lease monthly payment
- Including any tax charged on the payment.
- Due at signing (each lease)
- Each new lease is assumed to need the same amount at signing.
- Fee when returning each lease
- Many leases charge a fee when you return the car (a disposition fee). Add expected charges for extra miles or wear here too.
Formula and method
amount financed = price × (1 + sales tax) − down payment loan payment = A × i ÷ (1 − (1 + i)^(−n)), with i = APR ÷ 12 value after y years = price × (1 − depreciation)^y net cost of buying = down + loan payments made + balance left − value cost of leasing = leases × (signing + return fee) + lease payment × months savings from buying = cost of leasing − net cost of buying
In the loan formula, A is the amount financed (the amount you borrow), i is the monthly interest rate and n is the number of monthly payments. APR is the loan's yearly rate. The value formula uses y for the number of years.
Buying is counted as if you sold the car at the end. It's what you paid in, plus anything still owed on the loan, minus what the car is worth. That turns owning into a cost you can compare directly with leasing.
Leasing is a run of identical leases. Every lease you start adds its signing cost and its return fee. The monthly payment runs for every month of the period.
Worked example
Buy a $35,000 car with 7% sales tax, $4,000 down and a 60-month loan at 6.5%, losing 15% of its value a year. Or lease it for 36 months at $450 a month, with $2,500 due at signing and a $395 return fee. Compare over 6 years.
- Amount financed: $35,000 × 1.07 − $4,000 = $33,450, giving a loan payment of $654.49 a month.
- After 6 years, the car is worth $35,000 × 0.85^6 ≈ $13,200.23, and the loan is paid off.
- Net cost of buying: $4,000 + $39,269.26 of loan payments − $13,200.23 ≈ $30,069.03.
- Cost of leasing: 2 leases × ($2,500 + $395) + $450 × 72 = $38,190.00.
- Savings from buying: $38,190.00 − $30,069.03 ≈ $8,120.97.
Result: Over 6 years, buying costs about $8,120.97 less, and it pulls ahead in year 4. Over just 3 years, leasing is cheaper by about $1,664.50.
Understanding the result
A positive result means buying costs less over the years you entered. A negative one means leasing does. The year-by-year table shows when buying overtakes leasing. That's often soon after the second lease begins.
If you like a new car every few years, compare over one lease. If you'd keep a car well past its loan, compare over that longer period. The years without payments are where buying wins.
The resale value is the biggest unknown. Try a higher and a lower depreciation rate to see how much the answer moves.
Assumptions and limitations
- Fuel, insurance and routine maintenance cost the same either way, so they're left out.
- Each new lease has the same payment and terms as the first.
- The bought car is sold at the end of the period for its depreciated value. Any loan balance is paid off then.
- A dollar later counts the same as a dollar today. No interest or return is counted on cash the cheaper option leaves in your pocket.
- Repairs after the warranty ends aren't included. Those tend to fall on owners of older cars.
- It doesn't cover ending a lease early, buying the car at the end of a lease, or gap insurance.
- Tax rules differ by location. Some places tax a lease up front rather than on each payment.
- This compares costs under your assumptions. It isn't a dealer quote or financial advice.
Frequently asked questions
Why does leasing win over short periods?
In the first years, the buyer's loan payments are higher, and the car loses value fastest. Say you stop the comparison when the first lease ends. By then the buyer has paid a lot, and the car's value has dropped a lot. So leasing often comes out ahead.
Why does buying win over long periods?
Once the loan is paid off, the owner has no car payment, while the person leasing keeps paying. The bought car also still has some value at the end. Every extra year of driving widens that gap.
Should I include the lease's first payment in the amount due at signing?
No. The calculator already charges the monthly payment for every month, including the first. Entering it again in the signing amount would count it twice.
How do I estimate the depreciation rate?
Compare asking prices for the same model at different ages. Or use the lease's residual value as a guide. That's what the leasing company expects the car to be worth at the end. A 58% residual after 3 years means losing about 16.6% a year, since 0.834 cubed is about 0.58.
How this calculator is checked
Method: Total-cost comparison: level-payment auto loan with compound depreciation and resale at the end, against back-to-back leases with signing and return costs. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.
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