Lease vs Buy Calculator

About Lease vs Buy Calculator

The Lease vs Buy Calculator gives you an honest, side-by-side comparison of the true total cost of leasing versus financing a car, truck, or business asset. Most online calculators simplify the question to "lower monthly payment wins." Reality is messier: leases roll over with new acquisition fees, buyers build equity that offsets their interest, and the cash you put down on a purchase is cash you could have invested elsewhere. This tool models all three.

What makes this calculator different

How to use the Lease vs Buy Calculator

1. Pick a quick example — economy car, luxury sedan, pickup truck, or business equipment — to populate every field with a realistic scenario, or enter your own numbers from scratch.
2. In the lease pane, enter the dealer-quoted monthly payment, term in months, due at signing, acquisition and disposition fees, mileage allowance, and per-mile excess fee.
3. In the buy pane, enter your down payment, APR, loan term, and the resale value you expect at the end of your analysis horizon.
4. Set the shared inputs: how many years you plan to keep the asset, how many miles you actually drive per year, and the opportunity-cost rate (a high-yield savings or index-fund return is a fair benchmark — typically 4-7%).
5. Hit "Calculate & compare." Read the verdict card, compare the breakdowns, study the chart, and use the step-by-step section to see exactly how every number was derived.

The math under the hood

The buy side uses the standard amortization formula:

\( \text{PMT} = P \cdot \dfrac{r(1+r)^n}{(1+r)^n - 1} \)

where \( P \) is the financed amount, \( r \) is the monthly rate (APR / 12 / 100), and \( n \) is the loan term in months. When the APR is 0 (a promotional finance offer), the formula reduces to a simple division to avoid the rate-zero singularity.

Remaining loan balance after \( k \) months follows from the closed-form expression:

\( B_k = P(1+r)^k - \text{PMT} \cdot \dfrac{(1+r)^k - 1}{r} \)

The lease side is built up month by month: down payment plus acquisition fee at every cycle start, monthly payment every month, disposition fee plus prorated excess mileage at every cycle end. Opportunity cost on the buy down payment is compounded monthly:

\( \text{Foregone}_m = D \cdot \left[(1 + r_o/12)^m - 1\right] \)

Frequently Asked Questions

When does leasing usually beat buying?

Leasing typically wins when you replace the asset every 2-4 years, drive within the mileage allowance, value lower monthly cash outflow over equity, and want predictable maintenance under warranty. The shorter your holding period, the more often leasing pencils out.

Why do you include opportunity cost on the down payment?

A down payment is cash you can't invest elsewhere. If a high-yield account or index fund could earn 4-7% on that money, ignoring the foregone return understates the true cost of buying. We compound the opportunity cost monthly so the comparison is honest.

What does break-even month mean?

It's the first month where the buying option's cumulative cost (after subtracting equity built so far) drops below the lease's cumulative cost. Before that month, leasing has lower running cost; after it, buying pulls ahead.

How are excess mileage fees calculated?

If your annual mileage exceeds the lease allowance, the difference times the per-mile fee times the number of years is added to the lease cost. The fee is typically $0.15-$0.30 per mile and is charged at lease end.

Does the calculator handle horizons longer than the lease term?

Yes. If your analysis horizon exceeds one lease term, the calculator rolls over to a new lease cycle automatically, charging the down payment, acquisition fee, and disposition fee at each cycle boundary. This is the realistic comparison for someone who plans to keep leasing.

Why does the buy total subtract equity?

When you buy, you can sell the asset at the end of the horizon for its resale value, minus any remaining loan balance. That equity is real money in your pocket, so we deduct it from the gross buy cost to compare apples to apples with leasing, where you walk away with nothing.

Should I trust the dealer's lease quote?

Always confirm the monthly payment, money factor (APR equivalent ÷ 2400), residual percentage, acquisition fee, disposition fee, and mileage allowance in writing before signing. Plug those numbers into this calculator before you commit.

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