Buy vs Lease Car Calculator – Car Loan vs Lease Comparison
The Buy vs Lease Car Calculator is designed to help you understand the real cost of driving a car over time. Instead of looking only at a monthly payment, it shows how down payments, taxes, fees, mileage limits and residual value affect the total cost of buying versus leasing.
Buying a car with a loan usually means higher monthly payments but you own an asset that retains value. Leasing typically offers lower monthly payments and easy upgrades, but you do not build equity and you may face mileage penalties and wear charges. This calculator breaks those trade-offs into clear numbers so you can make a more informed decision.
How the Buy vs Lease Car Calculator Works
The calculator is organized into four connected modes:
- Buy Scenario: Calculates monthly loan payments, total cost, interest paid and effective cost per month.
- Lease Scenario: Estimates total lease payments, taxes, fees and average monthly cost.
- Mileage & Overages: Shows how exceeding your lease mileage allowance changes total lease cost.
- Residual Value & Comparison: Combines buy and lease totals with the car’s value at the end to show net cost and a simple buy vs lease verdict.
You can use the modes separately or sequentially. Many drivers start with the buy and lease tabs to get baseline totals, then adjust mileage and residual assumptions to see how the comparison changes.
Mode 1: Buy Scenario – Car Loan Cost
In the Buy Scenario tab, you enter the car price before tax, down payment, taxes, fees, loan term, interest rate and how long you plan to keep the car. The calculator estimates your monthly loan payment and total cost over your chosen ownership horizon.
Buy Scenario Formulas
Amount Financed = Car Price + Sales Tax + Fees − Down Payment
Monthly Interest Rate = APR ÷ 12 ÷ 100
Loan Term (Months) = Loan Term (Years) × 12
Monthly Payment = if rate > 0:
P × r ÷ (1 − (1 + r)−n)
else: P ÷ n
Total Interest ≈ Monthly Payment × n − Amount Financed
The total cost over your horizon includes the down payment, all monthly payments over that period and fees. The calculator assumes you make standard payments for the full loan term if your ownership horizon is at least as long as the term. For shorter horizons, the monthly payment still reflects the full term but the total cost is based on the months you plan to keep the car.
Mode 2: Lease Scenario – Monthly Lease Cost
The Lease Scenario tab focuses on predictable cash flows: monthly lease payments, taxes on those payments, drive-off costs and turn-in fees. You enter the monthly lease amount before tax, the lease term in months, any up-front cap cost reduction, lease fees, sales tax rate and the disposition fee due at the end of the lease.
Lease Scenario Formulas
Monthly Payment with Tax = Monthly Lease Payment + Monthly Tax
Total Monthly Payments = Monthly Payment with Tax × Lease Term (Months)
Total Lease Cost = Total Monthly Payments + Lease Down Payment + Lease Fees + Disposition Fee
The total lease cost shows what you pay to use the car for the full lease term, ignoring excess mileage, wear and tear or buyout options. The effective monthly cost is simply the total lease cost divided by the lease term in months.
Mode 3: Mileage & Overages – Excess Mileage Charges
Leases come with a mileage allowance. Driving more than the allowance often results in per-mile penalties. The Mileage & Overages tab highlights how your driving habits align with the allowance and how much excess mileage could cost.
Mileage Impact Formulas
Estimated Miles Driven = Expected Miles per Year × Lease Term (Years)
Excess Miles = max(0, Estimated Miles Driven − Total Allowed Miles)
Excess Mileage Charges = Excess Miles × Excess Charge per Mile
If you routinely drive more than the allowance, leasing can become significantly more expensive once mileage penalties are added. After calculating excess mileage charges, you can add them to the lease total in your own notes when comparing buy vs lease.
Mode 4: Residual Value & Buy vs Lease Comparison
The Residual Value & Comparison tab brings everything together. You enter an estimated value for the car at the end of your chosen term, plus total buy and lease costs. If you leave the buy and lease cost fields at zero, the calculator uses the latest results from the buy and lease tabs. You can also enter a lease-end buyout price if you expect to purchase the car after leasing.
Residual Value and Net Cost Formulas
Net Cost of Leasing = Total Lease Cost + Lease-End Buyout (if any)
Cost Difference = Net Cost of Leasing − Net Cost of Buying
If the cost difference is positive, buying appears cheaper on a net basis for the values you entered. If it is negative, leasing appears cheaper. This provides a straightforward way to see how residual value and buyout decisions affect the comparison.
How to Interpret the Results
The calculator focuses on financial factors, but there are qualitative trade-offs to consider:
- Buying: Higher monthly payments, but you own an asset that retains value and you are free from mileage limits once the loan is paid.
- Leasing: Lower monthly payments and more frequent upgrades, but limited mileage, no ownership and potential turn-in charges.
- Driving Habits: High annual mileage can make leasing expensive; very low mileage may favor leasing.
- Time Horizon: Long-term keepers often favor buying, while people who change cars frequently may find leases attractive.
Use the net cost comparison as a guide, not a final verdict. Contract details, tax treatment and personal preferences can all change the decision.
Limitations and Assumptions
This Buy vs Lease Car Calculator simplifies several real-world details:
- It assumes fixed monthly payments for both loans and leases, without fees that vary over time.
- It does not model complex lease structures such as money factors, cap cost reductions in detail or different tax treatments in different regions.
- Maintenance and repair costs, insurance differences and warranty coverage are not included and may differ between buying and leasing.
- The car’s value at the end of the term is an estimate and can change based on market conditions and vehicle condition.
Always review your specific lease or loan contract, talk to your dealer and consult finance or tax professionals for formal advice.
How to Use This Tool Effectively
- Start with the Buy Scenario tab to understand your loan payment and total cost over your planned ownership horizon.
- Use the Lease Scenario tab to see how much a lease really costs, including taxes, fees and the disposition fee.
- Add your expected driving to the Mileage & Overages tab to see if your habits are lease-friendly or not.
- Enter a realistic Residual Value and any lease buyout you are considering in the comparison tab.
- Compare the net cost of buying versus leasing, and then layer on personal factors such as flexibility, warranties and preferences.
Related Tools from MyTimeCalculator
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Buy vs Lease Car Calculator FAQs
Frequently Asked Questions About Buying vs Leasing a Car
Find answers to common questions about car loans, leases, mileage limits, residual value and total cost of ownership.
Not necessarily. Lease payments are often lower than loan payments, but you are paying mainly for depreciation and finance charges and you do not build ownership. Over several years, buying can be cheaper once you factor in the car’s remaining value and the option of keeping it without payments after the loan ends.
Excess mileage charges can significantly increase the cost of a lease, especially if you drive far more than the allowance each year. The mileage tab helps you estimate these charges so you can adjust your lease total before comparing it with buying.
Residual value is an estimate of what the car will be worth at the end of your term. For buying, higher residual value means more equity and a lower net cost. For leasing, the residual is often used to set payments and buyout options. The residual tab shows how end-of-term value changes the overall picture.
No. Maintenance, tire replacement and insurance can differ between buying and leasing, especially when leases require higher coverage levels. You can account for these items separately by adding estimated amounts to each side of the comparison.
Yes. As long as you have the price, down payment, loan or lease terms and an estimate of the future value, you can use the same structure for both new and used vehicles. Just be sure your interest rate, residual and mileage assumptions match the type of vehicle and contract you are considering.
Not always. While cost is important, other factors matter too: how often you like to change cars, whether you want to modify the vehicle, your tolerance for long-term commitments and your cash flow needs. The calculator focuses on cost so you can weigh it against these qualitative preferences.