Lease vs Buy Car
By David Moreira ·
Updated
Compare the same ownership horizon, not only the monthly payment. A lease gives you use of a vehicle under a contract; financing a purchase builds ownership subject to the loan. The US Consumer Financial Protection Bureau explains lease mileage limits, end costs, ownership and early termination charges. CFPB.
A hypothetical 36-month comparison
Use the Lease vs Buy Calculator defaults and enable a custom 36-month comparison. Lease inputs: $300/month, 36-month term, $2,000 down and $800 end costs. Buy inputs: $30,000 price, $5,000 down, 60-month loan, 5% APR and $15,000 estimated value at month 36. Both use 7% sales tax, $1,500/year insurance and $500/year maintenance. These are illustrative US inputs, not market offers. Lease vs Buy Car Calculator.
The calculator applies tax to lease payments: $10,800 × 7% = $756. Lease total is $10,800 + $2,000 + $800 + $756 + $6,000 insurance/maintenance = $20,356.00 .
For buying it finances $30,000 + $2,100 tax − $5,000 down = $27,100. At monthly interest 0.05 ÷ 12, the 60-month amortizing payment is $511.41 . Use the unrounded payment for subsequent calculations. After 36 payments the balance is $11,657.04 .
Buy cost is down payment + 36 payments + remaining balance − estimated resale value + insurance/maintenance: $26,067.81 . Under these assumptions the lease is $5,711.81 lower. The resale value must be your estimate for month 36; a different value can change the outcome. Settling the remaining balance matters when comparing sale proceeds.
Adjust the assumptions before choosing
The default full-term setting compares the 36-month lease against a 60-month loan. Select the custom horizon when you want an equal-period comparison. The calculation is not a complete tax model: jurisdictions may tax leases or purchases differently, and the tool excludes fuel, registration, opportunity cost and costs not entered.
Read the lease’s mileage allowance, wear terms and early termination provisions. Compare lender APR and total repayment, rather than assuming a longer loan saves money. The linked consumer-finance resources explain these purchasing considerations. Business deductions depend on jurisdiction and circumstances; they are not included in this example. CFPB auto-loan resources.