Lease vs Buy Calculator
Leasing and buying are usually compared on the monthly payment, which is the one number guaranteed to favour the lease. This compares the total cost over the length of the lease, counting what the car is still worth to you at the end if you bought it.
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Comparing them fairly
The trap in this comparison is that the two options do not produce the same thing. At the end of a lease you have nothing. At the end of the same period, having bought, you have a car — possibly with a loan still attached to it.
So the calculation is: for leasing, everything you hand over — the amount due at signing, every monthly payment, and any excess-mileage charge at the end. For buying, everything you hand over over the same window, plus whatever loan balance is left, minus the car’s value at that point. That last subtraction is what makes it a like-for-like comparison.
Where leasing genuinely wins
Leasing tends to come out ahead when you want a new car every few years regardless, when you drive predictably within the allowance, when you value being under warranty for the whole term, or when the manufacturer is subsidising the lease to move stock. Business use can change the tax picture substantially too, and that is not modelled here.
Where buying wins
Buying almost always wins if you keep cars a long time. The expensive years of a car’s life are the first three or four; the cheap years come afterwards, and a serial leaser never reaches them. Buying also wins if your mileage is high or unpredictable, because excess-mileage charges accumulate quietly and land as a single bill at the end.
The mileage allowance is the detail people miss
A quarter per mile does not sound like much. Three thousand miles a year over a three-year lease is nine thousand miles, which at that rate is a bill in the region of two thousand dollars — arriving at the exact moment you were expecting to walk away. Set your real annual mileage above, not the number you hope for.
Frequently asked questions
Is leasing ever cheaper than buying?
Over a single short term it can be, particularly when a manufacturer is subsidising the lease, or on a model that depreciates unusually fast. Over a decade of driving it very rarely is, because leasing means permanently paying for the steepest part of every car's depreciation curve.
What happens if I go over the mileage allowance?
You are billed for each excess mile at the rate in the contract, typically 15 to 30 cents. It is charged at the end of the lease as a lump sum. Buying extra miles up front is usually cheaper than paying the overage rate afterwards, if you know you will need them.
Can I buy the car at the end of a lease?
Most leases include a purchase option at a price set at the start, called the residual value. Whether it is a good deal depends entirely on how the used market moved during the lease - if values rose, the fixed buyout can be well below market.
Does this calculation include insurance?
No, because it applies to both options. Note though that leases usually require higher liability limits and lower deductibles than you might otherwise choose, so leasing can carry a somewhat higher premium on the same car.