Lease vs Buy Financial Comparison
Compare total lease cost against financed-purchase net cost over matching or differing terms.
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What this tool does
This calculator compares the total cost of leasing a vehicle against the net cost of buying it with financing. On the buy side, it computes the monthly loan payment using standard amortisation (given purchase price, APR and term), sums all payments, then subtracts the assumed resale value at term end. On the lease side, it adds all monthly lease payments plus any upfront payment. The output shows which option costs less over the period and by how much.
How Lease vs Buy Financial Comparison works
This tool performs a like-for-like cost comparison: total lease outlay versus total buy outlay after resale. For the purchase scenario, it calculates the monthly payment using the standard fixed-rate loan amortisation formula, multiplies by the loan term, then subtracts the user-supplied resale value at the end of that term. For the lease scenario, it multiplies the monthly lease payment by the lease term and adds any upfront payment. The absolute difference between these two figures is the primary result, labelled to indicate which option costs less.
The formula
Buy net cost = (monthly loan payment × buy term in months) − resale value
Lease total = (lease monthly × lease term) + lease upfront
Difference = |lease total − buy net cost|
The monthly loan payment is derived from the standard amortisation equation: P × [r(1+r)^n] / [(1+r)^n − 1], where P is the principal (purchase price), r is the monthly interest rate (APR ÷ 12 ÷ 100) and n is the number of months.
Where this method is most accurate
The calculation is a straight arithmetic comparison and does not account for opportunity cost, tax treatment, balloon payments, excess-mileage fees, or disposition fees that may appear in real lease agreements. Resale value is user-supplied; no depreciation model is embedded. The comparison assumes constant monthly payments and a single upfront for the lease. Buy and lease terms need not match in length, which can make direct comparison less intuitive—ensure the resale value corresponds to the point in time at which the buy loan ends, not necessarily the lease end.
What this tool does not do
It does not predict future resale values, recommend one financing path over the other, or incorporate insurance, maintenance, fuel, registration or tax differences between owning and leasing. It omits any residual-value guarantees, purchase-option fees at lease end, or early-termination penalties. The tool does not evaluate credit score, lender requirements, or jurisdiction-specific lease regulations.
Disclaimer
This calculator is an educational tool that performs arithmetic on user-supplied figures. It is not financial advice and does not constitute a recommendation to lease or buy any vehicle. Actual costs depend on contract terms, creditworthiness, market conditions and other factors beyond the scope of this calculation.
Questions
- Why does the calculator subtract resale value only on the buy side?
- When buying, the owner retains the vehicle at term end and can sell it; the resale value offsets the total paid. When leasing, the vehicle is returned to the lessor with no residual equity to the lessee, so there is no offsetting resale to subtract.
- Can I compare a 60-month purchase term to a 36-month lease?
- Yes. The tool accepts different term lengths. However, interpreting the result requires care: you are comparing total outlays over different periods. Ensure the resale value you enter corresponds to the end of the buy term, not the lease term.
- Does the result include taxes, fees or insurance?
- No. The calculation uses only the purchase price, loan APR, lease payments and upfront amount you provide. Sales tax, acquisition fees, disposition fees, excess-mileage charges, insurance and maintenance are not factored in.
- What if I plan to buy out the lease at the end?
- This tool models a standard closed-end lease with no purchase option exercised. If you intend to buy the car at lease end, add the residual buyout price to the lease total manually, then compare.
- How accurate is the resale value assumption?
- The resale figure is entirely user-supplied; the calculator performs no depreciation modelling. Real resale values depend on mileage, condition, market demand and brand. Using historical depreciation data or trade guides can improve the estimate's realism.
Sources & Methodology
Buy net cost is computed by applying the standard fixed-rate amortisation formula—monthly payment = P × [r(1+r)^n] / [(1+r)^n − 1]—then multiplying by the term and subtracting the user-supplied resale value. Lease total sums all monthly payments plus the upfront. The difference indicates which scenario costs less over the respective terms.