Lease vs Buy a Car

Apples-to-apples comparison: chain back-to-back leases over your holding period, vs buying once and keeping the car. Includes the wealth from investing whichever option costs less each year.

📖 About this tool

What it does

Apples-to-apples wealth comparison between buying once and chaining back-to-back leases over a holding period. Models lease cycles (down at signing + monthly + acquisition/disposition fees), buying (loan amortization + depreciation + resale), and invests the surplus from whichever costs less in a given year.

Who this helps

Anyone deciding between leasing and buying a car. Lease often wins on monthly cash flow; buying usually wins past year ~5 once the loan ends and the vehicle still has value.

How to use it

  1. Enter the car price and annual depreciation.
  2. Enter the buy scenario: down, APR, term, insurance, maintenance.
  3. Enter the lease scenario: cap-cost reduction, monthly payment, term (24/36/39/48), insurance, maintenance, fees per cycle.
  4. Set holding period (default 9 years = three 3-yr lease cycles, or one buy + 4 yrs payment-free).
  5. Pick an investment return rate.
  6. Read the cumulative cost chart and the verdict.

What it doesn't do

Doesn't model mileage overage charges on lease (assume you stay under the cap). Doesn't model lease-end buyout option (treat that as a fresh buy decision).

Inputs

The Car

Buy

Buy keeps the car after the loan ends — every year past the loan is "free" (insurance + maintenance only). Resale value is captured at the end of the holding period.

Lease (chained back-to-back leases)

A new lease starts every Lease Term months. Each cycle pays the down payment + acquisition fee up front, then monthly payments + insurance + (usually minimal) maintenance during the term, then a disposition fee at turn-in. Lessees never own the car — there's no resale value at the end.

Holding Period & Market

Lease vs Buy Comparison

Cumulative Out-of-Pocket Cost
Wealth from Investing the Savings
Year-by-Year
Year Buy: Annual Cost Lease: Annual Cost Annual Diff Buy: Cumulative Lease: Cumulative Buy Net Wealth Lead