Lease vs buy calculator
Compare the total cost of leasing vs financing a vehicle purchase, with a clear recommendation on which option is cheaper.
Calculator vehiclesLogic updated April 2026
This calculator compares leasing a vehicle against buying one with finance over the lease term window. It tracks cumulative cost month by month for each option and identifies the break-even month — the point at which one option becomes cheaper than the other. Fuel cost is shown for context but doesn't drive the comparison since it's identical for both options.
How this is calculated
Formula
Lease total = leaseMonthlyPayment × leaseTerm + leaseResidual ; Buy total = totalFinanceInterest + (purchasePrice − resaleValue) ; break-even = first month cumulative cost of one option exceeds the otherStep-by-step
- Calculate lease total: monthly payment × lease term in months, plus the residual buyout
- For the buy path: compute the financed amount (purchase price − deposit) and apply standard amortisation at the finance rate
- Sum total interest paid over the finance term
- Buy total cost = total interest + (purchase price − resale value at end of period) — the price minus what you can sell it for
- Walk forward month-by-month, tracking cumulative cost under each option
- Break-even month is the first month cumulative cost crosses — usually leasing is cheaper early, buying later
- Rounding mode
- ROUND_HALF_UP
- Precision
- 20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
- Logic last reviewed
Assumptions & limitations
What this calculator assumes
- Lease total cost includes all monthly payments plus the residual buyout
- Buy total cost = total interest paid + (purchase price − resale value)
- Buy finance is fixed-rate with monthly repayments
- Depreciation for the buy option is spread evenly across the finance term
- Fuel cost is identical for both options (same km, consumption, price) and is informational
- Break-even month is the first month where the cumulative cost of the losing option exceeds the winning option
What this calculator doesn’t account for
- Doesn't model lease excess-mileage charges if you exceed the kilometre allowance
- Doesn't include lease end-of-term wear-and-tear charges
- Doesn't factor in tax effects (deductibility differs by jurisdiction and use)
- Doesn't model lease early-termination fees
- Doesn't include any insurance differences between leased and owned vehicles
Worked example
A buyer compares a 36-month lease at $500/month with a $15,000 residual against buying a $40,000 car with a $5,000 deposit, financed at 7% over 60 months, with a $20,000 expected resale value at month 36.
| Input | Value |
|---|---|
| Lease monthly / term / residual | $500 / 36 months / $15,000 |
| Purchase price / deposit | $40,000 / $5,000 |
| Finance rate / term | 7% / 60 months |
| Resale at month 36 | $20,000 |
Lease total: $33,000 — Buy total cost: ~$24,500 — Buy wins by ~$8,500 — Break-even: ~month 22
Lease: 36 × $500 = $18,000 monthly + $15,000 residual = $33,000. Buy: $40k − $20k resale = $20k of depreciation, plus ~$4,500 interest paid over 36 months on the $35k financed = $24,500 net cost. Buying wins by ~$8,500 — but only if you're prepared to commit the deposit and continue payments past month 36 to clear the loan. Lease wins early; buy wins by the time the residual is settled.
Frequently asked questions
Is it cheaper to lease or buy?
Buying is usually cheaper over a long ownership horizon (5+ years) because depreciation slows after year 3 while lease payments stay constant. Leasing is often cheaper for short ownership (under 3 years) or when you genuinely need a new car every few years. The calculator shows the break-even month for your specific inputs — that's the real answer for your situation.
What is a residual value?
The lessor's estimate of what the vehicle will be worth at lease end — typically 40–60% of purchase price for a 3-year lease. Lease monthly payments are based on (purchase price − residual) ÷ term plus interest. Lower residual → higher monthly payment, but you can buy out the lease cheaper at the end. Higher residual → lower monthly payment, more expensive buyout.
How does mileage affect leasing costs?
Most leases include a mileage allowance (typically 12,000–20,000 km/year). Exceeding it triggers per-km penalty fees of $0.10–$0.30/km, which add up quickly. A 5,000 km/year overage at $0.20/km is $1,000/year. Heavy drivers should buy rather than lease, or pay extra at signing for a higher mileage allowance — that's almost always cheaper than per-km penalties.
What happens at the end of a lease?
Three options: hand the vehicle back (subject to wear-and-tear and excess-mileage fees), buy out the lease at the residual value, or trade in for a new lease. Hand-back is the most common but can produce surprise charges if the vehicle has cosmetic damage. Buyout is sometimes a great deal if the residual is below market value — check the second-hand market on similar vehicles before deciding.
Are leases tax-deductible?
Tax treatment varies by jurisdiction and use case. In many jurisdictions, lease payments on a vehicle used for business are deductible as a business expense, while car-loan interest is also typically deductible — but usually proportionally to business use. Personal-use leasing is rarely tax-favoured. This calculator doesn't model tax effects; consult a qualified tax adviser for your specific situation.
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