Lease vs. Buy Calculator
Compare the total cost of leasing versus buying an asset. See which option costs less and when buying breaks even against leasing.
Did this tool work for you?
How to use this calculator
Compare total out-of-pocket costs over the same period. Residual value at end of purchase term offsets the buy total.
- 1
Enter the full price of the asset (car, equipment, etc.).
- 2
Enter the lease terms: monthly payment and lease duration in months.
- 3
Enter the purchase terms: down payment, loan interest rate, and loan term in months.
- 4
Compare total costs and note the break-even month — the point at which buying becomes cheaper than leasing.
Frequently asked questions
Why does leasing sometimes look cheaper?
Leasing looks cheaper because you only pay for the portion of the asset you use (depreciation + finance charge). At lease end you own nothing, but your out-of-pocket over the lease term is typically lower than buying. Buying is almost always cheaper over the asset's full useful life.
What is the break-even point?
The break-even month is when cumulative purchase costs (down payment + loan payments) equal cumulative lease payments. Before this month, buying is cheaper on a cumulative basis; after it, buying has cost more in total — but you own an asset with residual value.
Should I factor in the asset's residual value?
Yes. At the end of a purchase loan, you own an asset worth something. At the end of a lease, you own nothing. For a car, typical residual value after 5 years is 40–60% of purchase price. Subtract this from the total buy cost for a fair comparison.
What costs are not included?
Lease: excess mileage fees, wear-and-tear charges, and lease-end disposition fees. Purchase: maintenance, depreciation loss. Both: insurance, registration, taxes. Always factor these in for a complete comparison.
Lease vs. buy: making the right financial decision
When leasing makes sense
Leasing suits buyers who value lower monthly payments, like driving a new vehicle every 2–3 years, and stay within mileage limits. It also makes financial sense for businesses that can deduct lease payments as operating expenses. The downside: no equity buildup, mileage caps, and condition requirements.
When buying is the better choice
Buying is superior for long-term ownership. After the loan is paid off, you own an asset outright. For a car driven 15,000+ miles/year, owning avoids punishing per-mile charges. Buying also allows modifications and has no lease-end penalties. Over a 10-year horizon, buying nearly always wins financially.
Business considerations: lease vs buy
For businesses, leasing equipment often qualifies as a fully deductible operating expense in the year incurred, improving cash flow. Purchasing depreciates over multiple years but may qualify for Section 179 (US) immediate expensing. Consult an accountant to determine which treatment offers the greater tax advantage for your business.
Learn more from an authoritative source:
InvestopediaCompound Interest Calculator
Calculate how your investment or savings grows over time with the power of compounding.
Simple Interest Calculator
Calculate simple interest, total amount, and interest earned using principal, rate, and time.
ROI Calculator
Calculate return on investment, net profit, and annualised ROI for any investment.
CAGR Calculator
Calculate Compound Annual Growth Rate (CAGR) for investments, revenue, or any metric over time.
Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →