Buy, Lease or Finance a Car
Compare what a car costs per month if you pay cash, take out a car loan or lease it, including depreciation, running costs and interest.
Cheapest option, per month
$450.00
Buy, per month
$585.11
Finance, per month
$638.08
Lease, per month
$450.00
Monthly loan payment
$842.25
Break-even between buying and leasing
No break-even within the term
Total cost by month
- Buy
- Finance
- Lease
Show the table
| Month | Buy | Finance | Lease |
|---|
Please note: This is an example calculation, not financial advice. Personal circumstances, changes in rules and rates, and additional costs are not included. If in doubt, talk to a financial adviser.
Fuel or charging, mileage limits, deposits, balloon payments, end-of-lease charges and tax effects are not included.
How this number is calculated
The blocks use your input. Change a value above and they update with it.
Step 1 · Missed savings interest
Step 2 · Buy, total
Step 3 · Monthly loan payment
Step 4 · Finance, total
Step 5 · Lease, total
Step 6 · Cheapest option, per month
How the calculation works
Compare what a car costs you if you pay cash, take out a car loan or lease it. The calculator includes depreciation, running costs and interest, and puts the three options side by side per month.
When you buy, you pay for the car in one go. Your costs are the depreciation (purchase price minus the value at the end), the running costs for insurance, tax and maintenance, and the interest you miss because the money is no longer in savings. When you finance, you pay the car off with a loan: your costs are all the loan payments minus the value of the car you then own, plus the running costs. When you lease, you pay the lease cost and hand the car back at the end. The chart shows what each option has cost up to a given month, with depreciation spread over the term.
Formula
Buy = purchase price − value at the end + running costs × months + missed savings interest. Finance = loan payment × months − value at the end + running costs × months. Lease = lease cost × months. Per month = total ÷ months. Loan payment = price × r ÷ (1 − (1 + r)^−n), with r the monthly rate from the APR.
Assumptions
- Fuel or charging is the same for all three options and is not included.
- When buying or financing you pay the full price, with no deposit or balloon payment.
- The car loses the same percentage of its value every month, from the purchase price to the value at the end.
- The lease cost includes whatever you enter; mileage limits and end-of-lease charges are not included.
- The value at the end is an estimate; a sale can bring in more or less.
Example calculations
The button fills in the calculator above, so you can carry on from there.
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Average car
Cheapest option, per month
$550.00
Purchase price $35,000.00 · Term (months) 48 · Value at the end $17,000.00 · Running costs when you own it, per month $175.00 · Lease cost per month $550.00 · Loan rate (%) 7.5 · Savings rate (%) 2
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Low lease price
Cheapest option, per month
$449.00
Purchase price $35,000.00 · Term (months) 48 · Value at the end $17,000.00 · Running costs when you own it, per month $175.00 · Lease cost per month $449.00 · Loan rate (%) 7.5 · Savings rate (%) 2
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Keeping it longer
Cheapest option, per month
$550.00
Purchase price $35,000.00 · Term (months) 72 · Value at the end $11,000.00 · Running costs when you own it, per month $175.00 · Lease cost per month $550.00 · Loan rate (%) 7.5 · Savings rate (%) 2
Frequently asked questions
Is it cheaper to buy, finance or lease?
It depends mostly on the lease cost and the value at the end. For a car of 35,000 over 48 months, worth 17,000 at the end, with running costs of 150 a month, buying costs 585.11 a month, financing at 7.5% costs 638.08, and a lease of 450 a month costs 450.
Why is financing more expensive than paying cash?
When you finance, you pay interest on the loan; when you pay cash, you only miss out on savings interest. As the loan rate is almost always higher than the savings rate, financing costs more.
Why does the value at the end matter so much?
When you buy or finance, the car is yours at the end: what it is still worth comes off your costs. The higher that value, the better buying or financing looks. The car depreciation calculator gives an estimate.
What is the break-even point?
The moment the total cost of buying equals the total cost of leasing. For a car of 20,000 over 60 months, worth 8,000 at the end, against a lease of 399 a month, buying becomes cheaper than leasing after 3 years. Without a break-even, the same option stays cheaper for the whole term.
What is not included?
Fuel or charging, excess mileage on a lease, insurance excess after damage, a deposit, a balloon payment and tax rules for business use. They can change the outcome considerably; add them where they apply to you.
Last reviewed:
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