Why use this calculator
Deciding between buying and leasing a car is one of the most common financial dilemmas. This calculator compares the total cost of ownership through a car loan versus the total cost of leasing over a similar period. By factoring in down payment, interest, monthly payments, and residual value, you can make a data-driven decision about which option suits your financial situation better.
How to use it
Enter the car price, your planned down payment for a loan, the loan interest rate and term, the monthly lease payment and lease term, and the expected resale value of the car after the loan term. The calculator compares net costs of both options side by side.
The formula
Loan: Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]. Total Loan Cost = Down Payment + (Monthly Payment x Months). Net Loan Cost = Total Loan Cost - Residual Value. Lease: Total Cost = Monthly Payment x Lease Term.
Worked examples
$35,000 car with $5,000 down at 6% for 5 years vs $450/month lease for 36 months
Loan total: ~$40,799, net after resale: ~$22,799. Lease total: $16,200
$50,000 car with 10% down vs $600/month lease for 3 years
Compare ownership equity vs lease flexibility
When people use it
- Deciding between leasing and buying your next vehicle
- Comparing the true cost of ownership vs leasing over time
- Evaluating whether the equity from buying justifies the higher cost
- Planning vehicle expenses for business or personal use
Tips
- Leasing is often cheaper monthly but you build no equity in the vehicle
- Consider total cost of ownership including insurance, maintenance, and depreciation
- If you drive more than 15,000 km per year, leasing may incur excess mileage charges
- Buying makes more financial sense if you plan to keep the car for 7+ years
Questions people ask
- Is it better to lease or buy a car?
- It depends on your priorities. Buying builds equity and is cheaper long-term if you keep the car. Leasing offers lower monthly payments, always having a newer car, and no resale hassle, but you never own the vehicle.
- What happens at the end of a lease?
- At lease end, you typically return the car (and may owe fees for excess wear or mileage) or purchase the car at a predetermined residual value. Some leases offer the option to extend or lease a new vehicle.
- Should I put a down payment on a lease?
- Financial experts generally advise against large down payments on leases. If the car is stolen or totaled early in the lease, you may lose your down payment. Instead, negotiate lower monthly payments.