Car Loan vs Lease Calculator
Compare the true total cost of buying vs. leasing a car over the same period. Use this when shopping for a vehicle to see which option saves you more money long-term.
About this calculator
When financing a car, your monthly payment is determined by the standard amortization formula: M = (P × r × (1+r)^n) / ((1+r)^n − 1), where P is the loan principal (price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. The total loan cost equals M × n plus your down payment. For leasing, total cost is simply the monthly lease payment × 36 months (a standard lease term). The calculator then subtracts total lease cost from total loan cost to produce a difference — a positive result means leasing is cheaper over the comparison window, while a negative result means buying wins. This side-by-side view helps you weigh ownership equity against lower short-term cash outflow.
How to use
Suppose a car costs $30,000, you put $3,000 down, your loan rate is 6% over 5 years, and the lease payment is $350/month. Monthly rate r = 0.06/12 = 0.005; n = 60. Monthly payment M = ($27,000 × 0.005 × 1.005^60) / (1.005^60 − 1) ≈ $521.99. Total loan cost = $521.99 × 60 + $3,000 = $34,319.40. Total lease cost = $350 × 36 = $12,600. Difference = $34,319.40 − $12,600 = $21,719.40 more for buying over 3 years — though buying leaves you with an owned asset.
Frequently asked questions
Is it cheaper to lease or finance a car in the long run?
Leasing almost always has lower monthly payments and lower upfront costs, but you own nothing at the end of the term. Financing costs more per month, but you build equity and can sell or keep the vehicle. Over a 10-year horizon, buying the same car twice through financing is typically cheaper than leasing indefinitely, especially if you keep the vehicle after the loan is paid off.
What factors make leasing a better financial choice than buying?
Leasing makes sense when you prefer driving a new car every 2–3 years, want lower monthly cash outlays, or use the vehicle for business (lease payments are often deductible). It also works well if the car depreciates rapidly, since you hand it back before residual value collapses. However, mileage restrictions and wear-and-tear fees can erode those savings quickly.
How does a down payment affect the total cost of a car loan vs. lease comparison?
A larger down payment on a loan reduces the principal, lowering your monthly payment and total interest paid, making buying look more competitive. On a lease, a larger cap-cost reduction lowers monthly payments but is generally considered poor value since you lose that cash if the car is totaled early. For the fairest comparison, hold the down payment constant across both scenarios in this calculator.