Lease vs buy: what changes financially?

Leasing can be simpler month to month, but standard leases usually end with no owned vehicle asset. Buying creates ownership value, but the value may fall quickly through depreciation and financing costs.

Use the calculator to compare lease, finance, and cash assumptions over the same number of years.

Buying cash means the car is paid for immediately. There is no loan payment, but the cash is no longer available for other uses. The car-specific position is mostly driven by how quickly the vehicle depreciates compared with what was paid upfront.

Imagine a $70,000 car kept for five years. If it drops 15% per year, the estimated value after five years is about $31,000. A cash buyer who paid $70,000 still owns an asset, but the car-specific position is roughly negative $39,000 before taxes, fees, insurance, and maintenance.

A lease at $900 per month with $4,000 due at signing over the same period costs about $58,000 and ends with $0 owned vehicle value. A financed buyer needs a third number too: the remaining loan balance at each year.

Financing keeps more cash available at the start, but the buyer takes on a loan. A useful comparison should track the vehicle value, the remaining loan balance, the down payment, and the loan payments made so far.

A long loan term may lower the monthly payment, but it can also keep the loan balance higher for longer.

Leasing usually means paying for use of the car rather than building ownership equity. In a standard lease, the driver does not own the vehicle at the end, so the owned vehicle value is shown as zero unless a lease buyout is explicitly modeled.

The answer can change depending on how long the car is kept. A three year comparison may favor different choices than an eight year comparison because depreciation, loan payoff, and lease payments evolve over time.

Investing opportunity cost asks what relevant cash flows could become if invested instead. That is useful, but it should not be mixed into the main car position chart or it can make the same dollars appear in two places at once.

Estimates are for educational purposes only. This is not financial, legal, tax, insurance, lending, or vehicle-buying advice.