Lease vs Buy Calculator
Compare the true costs of leasing versus buying vehicles and equipment. Make informed decisions with our comprehensive cost analysis.
Lease Option
Buy Option
Comparison Results
Lease Summary
Buy Summary
Buying saves you $2,244 over 36 months
Based on your inputs, buying is the more cost-effective option
Lease vs Buy: Key Considerations
When Leasing Makes Sense
- • You prefer driving a new vehicle every 2-3 years
- • Lower monthly payments fit your budget better
- • You drive average miles (under 12,000-15,000/year)
- • You don't want to worry about resale value
- • Warranty covers most repairs during the lease
- • Business use allows lease payment deductions
When Buying Makes Sense
- • You plan to keep the vehicle 5+ years
- • You drive more than 15,000 miles per year
- • You want to build equity and own an asset
- • You prefer no mileage or wear restrictions
- • You want the freedom to modify your vehicle
- • Long-term cost savings are a priority
Understanding Lease Terms
Capitalized Cost
The vehicle's price after negotiation. You can negotiate this just like a purchase price. Lower cap cost means lower payments.
Residual Value
The car's projected value at lease end. Higher residual means lower depreciation and lower monthly payments.
Money Factor
The lease interest rate expressed as a decimal. Multiply by 2,400 to convert to annual percentage rate (APR).
Acquisition Fee
A one-time fee charged by the leasing company to set up the lease. Usually $500-$1,000 and typically non-negotiable.
Disposition Fee
A fee charged when you return the vehicle at lease end. Usually $300-$500. Waived if you lease or buy another vehicle from the same brand.
Excess Wear
Charges for damage beyond "normal wear and tear." Dents, scratches, stained interiors, and worn tires can add up.
Equipment Leasing for Business
Advantages of Leasing Equipment
- • Preserve cash flow for operations
- • Keep technology current with upgrades
- • Fixed monthly payments for easier budgeting
- • Potential tax advantages (fully deductible)
- • Maintenance often included
- • Easier approval than loans
Advantages of Buying Equipment
- • Build business assets and equity
- • Lower long-term total cost
- • No restrictions on usage or modifications
- • Depreciation tax benefits
- • Collateral for future financing
- • Resale value when upgrading
Types of Equipment Leases
Operating Lease
You rent the equipment for a portion of its useful life. At lease end, return the equipment with no further obligation. Best for short-term needs or rapidly depreciating technology.
Capital/Finance Lease
Structured like a loan where you eventually own the equipment. Payments cover the full cost plus interest. Best for long-term equipment you plan to keep.
$1 Buyout Lease
A capital lease where ownership transfers for $1 at the end. Higher monthly payments but you own the equipment. Good for long-lasting equipment.
Fair Market Value Lease
At lease end, you can buy the equipment at fair market value, extend the lease, or return it. Lower payments but uncertain buyout cost.
Frequently Asked Questions
Is leasing ever financially better than buying?
Yes, in specific cases: when you need lower monthly payments, when business tax deductions favor leasing, when you want always-new vehicles without depreciation risk, or when equipment technology changes rapidly.
What happens if I go over the mileage limit?
You'll pay an excess mileage fee, typically $0.15-$0.30 per mile. If you know you'll exceed limits, negotiate higher mileage upfront — it's cheaper than paying overages at lease end.
Can I negotiate lease terms?
Absolutely. You can negotiate the capitalized cost (car price), money factor (interest rate), and sometimes mileage allowance. Acquisition and disposition fees are usually fixed.
What if I want to end my lease early?
Early termination is expensive. You'll typically owe remaining payments plus the difference between payoff amount and car's current value. Some options: lease transfer, early buyout, or trading to a dealer.
Smart Decision Tips
- • Calculate total cost: Don't just compare monthly payments
- • Consider your lifestyle: Driving habits, how long you keep vehicles
- • Factor in maintenance: Leases often include warranty coverage
- • Check tax implications: Business use may favor one option
- • Read the fine print: Understand all fees and restrictions
- • Plan for the future: What happens when the term ends?