Lease vs. Buy Calculator: Should You Lease or Buy a Car?
By Wealthvieu · Updated
Should you lease or buy your next car? Here’s a detailed cost comparison to help you decide.
Quick answer:Buying is usually cheaper over 5+ years. A $35,000 car costs about $42,000 total to buy vs. $30,000 to lease over 3 years — but if you keep the bought car for 10 years, total cost drops to $50,000 vs. $100,000+ for continuous leasing.
Lease vs. Buy: Quick Comparison
Factor
Lease
Buy
Monthly payment
Lower
Higher
Ownership
Never own
Own it
Mileage limits
Yes (12-15k/year)
No limits
Customization
Not allowed
Your choice
End of term
Return car
Keep or sell
Total cost (10 years)
Higher
Lower
Best for
Low mileage, new car lovers
Long-term, high mileage
True Cost Comparison
$40,000 Vehicle Example
Lease Terms:
36-month lease
$3,000 down payment
$350/month
12,000 miles/year limit
Buy Terms:
$40,000 purchase price
$5,000 down payment
60-month loan at 6.5%
Keep car for 10 years
3-Year Comparison
Cost Category
Lease
Buy
Down payment
$3,000
$5,000
Monthly payments
$12,600
$20,388
Insurance
$5,400
$5,400
Maintenance
$300
$1,500
End fees
$500
—
Asset value at end
$0
~$22,000
Net 3-Year Cost
$21,800
~$10,288
5-Year Comparison
Cost Category
Lease (2 terms)
Buy
Payments
$28,200
$33,980
Down payments
$6,000
$5,000
Insurance
$9,000
$8,500
Maintenance
$600
$4,000
End fees
$1,000
—
Asset value at end
$0
~$16,000
Net 5-Year Cost
$44,800
~$35,480
10-Year Comparison
Cost Category
Lease (3+ terms)
Buy
Payments
$56,400
$33,980
Down payments
$12,000
$5,000
Insurance
$18,000
$15,000
Maintenance
$1,200
$12,000
Major repairs
$0
$3,000
End fees
$2,000
—
Asset value at end
$0
~$5,000**
Net 10-Year Cost
$89,600
~$63,980
Buying saves ~$25,000+ over 10 years
Lease Cost Breakdown
Monthly Lease Payment Components
Component
Description
Depreciation
(Cap Cost - Residual) ÷ Term
Finance charge
(Cap Cost + Residual) × Money Factor
Sales tax
Varies by state
Monthly payment
Sum of above
Example Calculation
Item
Value
MSRP
$40,000
Negotiated price (Cap Cost)
$38,000
Residual value (54%)
$21,600
Depreciation over 36 mo.
$16,400
Monthly depreciation
$456
Money factor
0.00200
Monthly finance charge
$119
Monthly payment (pre-tax)
$575
Hidden Lease Costs
Fee
Typical Amount
When
Acquisition fee
$500-$1,000
Lease start
Disposition fee
$300-$500
Lease end
Excess mileage
$0.15-$0.30/mile
End if over
Excess wear
$200-$2,000+
End
Early termination
Thousands
If break lease
Gap insurance
$300-$700
If needed
Mileage Overage Example
Miles Over
At $0.25/mile
1,000 miles
$250
3,000 miles
$750
5,000 miles
$1,250
10,000 miles
$2,500
15,000 miles
$3,750
Buy Cost Breakdown
Monthly Loan Payment
Loan Term
$35,000 Financed
$40,000 Financed
48 mo. @ 6.5%
$829
$948
60 mo. @ 6.5%
$684
$782
72 mo. @ 6.5%
$589
$673
Total Interest Paid
Loan Amount
48 Months
60 Months
72 Months
$30,000
$4,117
$5,183
$6,263
$35,000
$4,803
$6,047
$7,307
$40,000
$5,489
$6,911
$8,351
When Leasing Makes Sense
Situation
Why Lease
Drive < 12,000 miles/year
Won’t hit mileage limits
Want new car every 2-3 years
Always have latest features
Business use (tax deductible)
Can deduct lease payments
Short-term need
Moving soon, uncertain situation
Want lower monthly payments
Cash flow priority
Hate dealing with repairs
Car always under warranty
When Buying Makes Sense
Situation
Why Buy
Drive > 15,000 miles/year
No mileage penalties
Keep cars 5+ years
Best long-term value
Want to modify/customize
Your car, your rules
Build equity
Can sell or trade
Variable driving needs
No restrictions
Want to own outright
No perpetual payments
Break-Even Analysis
How long until buying beats leasing?
Scenario
Break-Even Point
Economy car ($30k)
~4 years
Mid-range car ($40k)
~4-5 years
Luxury car ($60k)
~5-6 years
High-depreciation car
~3-4 years
Low-depreciation car (Toyota, Honda)
~4-5 years
Key insight: If you keep a bought car past the break-even point, every additional year is almost “free” (just maintenance).
Cost Per Mile Comparison
$40,000 Vehicle, 15,000 Miles/Year
Ownership Period
Lease Cost/Mile
Buy Cost/Mile
Year 1-3
$0.49
$0.45
Year 4-6
$0.49
$0.25
Year 7-10
$0.49
$0.18
Long-term ownership dramatically reduces cost per mile.
Depreciation Reality Check
New cars depreciate rapidly:
Year
Approximate Value
% Lost
Purchase
$40,000
0%
Year 1
$34,000
15%
Year 2
$29,000
27%
Year 3
$25,000
37%
Year 5
$18,000
55%
Year 7
$13,000
67%
Year 10
$8,000
80%
When you lease, you pay for the steepest depreciation (years 1-3).
Alternative: Buy Used
3-Year-Old Used Car Purchase
Scenario
Cost
3-year-old car (was $40k new)
~$25,000
Let someone else pay first 3 years depreciation
-$15,000
Keep for 5 more years
Low cost
Total 5-year cost
~$18,000 (including maintenance)
Buying used = best of both worlds
Decision Framework
Lease If:
☐ Low annual mileage (< 12,000)
☐ Want new car every 2-3 years
☐ Cash flow is priority over total cost
☐ Business use with tax benefits
☐ Don’t want maintenance hassles
☐ Comfortable never owning
Buy New If:
☐ Plan to keep 5+ years
☐ Drive > 15,000 miles/year
☐ Want to customize
☐ Want to build equity
☐ Prefer no mileage restrictions
☐ Value long-term savings
Buy Used If:
☐ Maximum value priority
☐ Don’t need newest features
☐ Plan to keep 5+ years
☐ Comfortable with some miles
Total Cost Summary
Strategy
10-Year Total Cost
Lease continuously
$90,000-$120,000
Buy new, keep 5 years, repeat
$70,000-$90,000
Buy new, keep 10 years
$55,000-$70,000
Buy 2-year-old used, keep 8 years
$40,000-$55,000
Buy 3-year-old used, keep 7 years
$35,000-$50,000
Bottom Line
Leasing has lower monthly payments but costs more long-term
Buying is almost always cheaper if you keep the car 5+ years
Over 10 years, buying saves $20,000-$40,000 vs. continuous leasing
Leasing makes sense for low-mileage drivers who want new cars every 2-3 years
Best value: Buy a 2-3 year old used car and keep it 7+ years
Consider total cost of ownership, not just monthly payment