Question 1

Is leasing cheaper than buying?

Accepted Answer

It depends on your situation. Leasing typically has lower monthly payments and upfront costs, but you don't build equity and must return the car. Buying costs more upfront but you own the car and can benefit from resale value. Use this calculator to compare total costs over the same period for your specific situation.

Question 2

What is residual value?

Accepted Answer

Residual value is the estimated value of the car at the end of the lease term. It's set by the leasing company and affects your monthly payment - higher residual value means lower monthly payments. For buying, residual value refers to the resale value when you sell the car.

Question 3

How do mileage limits affect leasing?

Accepted Answer

Most leases have annual mileage limits (typically 10,000-15,000 miles). If you exceed the limit, you pay a fee per mile (usually $0.15-$0.30 per mile). High-mileage drivers can face significant penalties, making buying more cost-effective. Always consider your actual driving habits when leasing.

Question 4

Does leasing build equity?

Accepted Answer

No, leasing does not build equity. You're essentially renting the car. When the lease ends, you return the car and have nothing to show for your payments. Buying builds equity as you pay down the loan and the car retains some value.

Question 5

What about maintenance costs?

Accepted Answer

Leased cars are typically under warranty during the lease term, so maintenance costs may be lower. However, you're usually required to maintain the car according to manufacturer standards. When buying, you're responsible for all maintenance, especially after the warranty expires. The calculator allows you to account for maintenance cost differences.

Question 6

When does leasing make sense?

Accepted Answer

Leasing makes sense if: you want lower monthly payments, prefer driving new cars every few years, drive within mileage limits, want warranty coverage, don't want to deal with selling a car, or can deduct lease payments for business use. It's less ideal for high-mileage drivers or those who want to build equity.

Question 7

When does buying make sense?

Accepted Answer

Buying makes sense if: you drive many miles, want to build equity, plan to keep the car long-term, want to customize the car, prefer not having mileage restrictions, or want to avoid lease-end fees. Buying is generally better for long-term ownership.

Question 8

What happens at the end of a lease?

Accepted Answer

At lease end, you typically have three options: return the car and walk away (may pay for excess wear/tear), buy the car at the residual value, or lease a new car. You don't own anything unless you buy it, and you may face charges for excess wear, mileage, or damage.

Question 9

How does down payment affect the comparison?

Accepted Answer

A larger down payment reduces your loan amount and total interest paid when buying, making it more cost-effective. For leasing, a larger down payment (capitalized cost reduction) lowers monthly payments but you lose that money if the car is stolen or totaled. The calculator accounts for down payment impact on total costs.

Question 10

What is included in 'due at signing'?

Accepted Answer

'Due at signing' typically includes: first month's payment, security deposit, acquisition fee, taxes, registration, and any capitalized cost reduction (down payment). This is the total amount you pay upfront when starting a lease.

Question 11

Can I negotiate a lease?

Accepted Answer

Yes, you can negotiate: the capitalized cost (purchase price), money factor (interest rate), residual value, mileage limit, and fees. Research the car's value and current lease deals before negotiating. A lower capitalized cost and higher residual value reduce monthly payments.

Question 12

What if I want to end a lease early?

Accepted Answer

Ending a lease early usually results in significant penalties. You're responsible for remaining payments, early termination fees, and the difference between the car's value and what you owe. Some leases allow transfers to another person, which can be a better option than early termination.

Question 13

How accurate is this calculator?

Accepted Answer

The calculator provides estimates based on the information you provide. Actual costs will vary based on market conditions, negotiation, vehicle condition, and unexpected expenses. Use it as a planning tool and consult with dealers for actual quotes. The comparison helps you understand cost differences, but real-world results may vary.

Question 14

Should I include insurance differences?

Accepted Answer

Insurance costs can differ between leasing and buying. Leased cars often require full coverage and gap insurance, which may cost more. Some leases include insurance, while buying allows more flexibility. Include insurance differences if you know them, as they affect total cost of ownership.

Question 15

What about tax benefits?

Accepted Answer

If you use the vehicle for business, you may be able to deduct lease payments or depreciation. Tax benefits vary by country and situation. Consult a tax professional for advice on your specific circumstances. This calculator focuses on direct costs, not tax implications.

Lease vs Buy Calculator – Compare Total Cost of Leasing or Buying a Car

Calculator

How to Calculate

Calculation Examples

Example 1: Moderate Mileage, Low APR → Buy Wins

Example 2: High Depreciation / Short-Term → Lease Wins

Example 3: High Mileage Penalty → Buy Wins

Example 4: Higher Down Payment Impact

Frequently Asked Questions