Buy vs Lease Car Calculator 2025 – 5 Year Total Cost

Introduction

Lease: Lower monthly payment, always have a new car, never own anything. Buy: Higher payment, yours to keep, equity builds.

Which is cheaper over 5 years? The Buy vs Lease Calculator runs the complete cost comparison.

The Math: $35,000 Car Over 5 Years

Buying ($35k car, 7% APR, 60 months)

Costs:

• Down payment: $5,000
• Monthly payment: $594
• Total payments: $35,640
• Insurance: $1,800/year × 5 = $9,000
• Maintenance (years 3-5): $3,000
• Registration/fees: $2,000
• Total Spent: $54,640

Value after 5 years: $15,000 (43% depreciation)

Net Cost: $54,640 - $15,000 = $39,640

Leasing (2 leases, 36 months each)

Lease 1 (Years 1-3):

• Down payment: $2,000
• Monthly: $399 × 36 = $14,364
• Insurance: $1,600/year × 3 = $4,800
• Registration: $1,200
• Subtotal: $22,364

Lease 2 (Years 4-5, 24 months):

• Down payment: $2,000
• Monthly: $420 × 24 = $10,080
• Insurance: $1,600/year × 2 = $3,200
• Registration: $800
• Subtotal: $16,080

Total 5-Year Cost: $22,364 + $16,080 = $38,444

Value After 5 Years: $0 (you own nothing)

When Buying Wins

✅ Buy if:

• Keeping car 7+ years
• Drive \u003e15k miles/year
• Want to own/customize
• Good with maintenance

Long-term ownership is always cheaper eventually.

Break-Even: Typically 6-8 years

When Leasing Wins

✅ Lease if:

• Want new car every 3 years
• Drive \u003c12k miles/year
• Hate maintenance/repairs
• Business write-off
• Low/no down payment available

Leasing makes sense for constant upgraders who value newness over ownership.

Hidden Costs of Leasing

❌ Mileage Overage: $0.25/mile over limit

• 15k miles/year plan, drive 18k = 3,000 × $0.25 = $750/year penalty

❌ Excessive Wear & Tear: $500-$2,000 at turn-in

• Scratches, dents, tire wear

❌ Early Termination: $1,000-$5,000 penalty

❌ Disposition Fee: $300-$500 at lease end

Hidden Costs of Buying

❌ Depreciation: Lose 20-30% value in first year

❌ Maintenance: Years 4-6 can be $2,000-$4,000/year

❌ Interest: Pay $5,000-$10,000 in interest on financed purchase

Business Use: Lease Has Tax Advantages

Leasing for Business:

• Deduct 100% of lease payments (if business use)
• Simpler accounting

Buying for Business:

• Depreciation deduction (Section 179: up to $20,000 first year)
• Interest deduction

For business owners: Leasing often better tax-wise.

Best-Case Scenario for Each

Buying (Lowest Total Cost)

Strategy:

• Buy 2-3 year old certified pre-owned
• Finance at low rate or pay cash
• Drive 10+ years
• DIY maintenance where possible

Example: $35k new car

• Buy 3-year-old version for $22k
• Drive 7 more years
• Total cost: ~$28k (depreciation + maintenance)
• vs. $70k+ for leasing equivalent period

Leasing (Maximized Value)

Strategy:

• Negotiate low cap cost
• High residual value car
• Loyalty/conquest rebates
• Low money factor (interest)

Target: $250-$350/month for $35k MSRP vehicle

Common Mistakes

❌ Comparing Monthly Payments Only: Lease looks cheaper but hidden costs

❌ Leasing Expensive Cars You Can't Afford: $80k car lease still $600+/month

❌ Buying New Every 3 Years: Worst of both worlds (max depreciation, no equity)

❌ Going Over Mileage: Brutal penalty fees

FAQ

Q: Can I buy my leased car at the end? A: Yes (lease buyout), but residual value is often higher than market value.

Q: What if I total a leased car? A: Insurance pays off lease (gap insurance recommended). Not your problem beyond deductible.

Q: Should I put money down on a lease? A: Minimize down payment. If car is totaled early, you lose that money.

Q: What about electric vehicles? A: Leasing EVs can be smarter (technology changes fast, battery degradation risk).

Related Calculators

• Auto Loan Calculator: /calculator/08-auto-loan
• Total Cost of Ownership: /calculator/vehicle-tco

Conclusion

Over 5 years, costs are similar. Leasing saves ~$1,000-$2,000 but you own nothing. Buying costs more upfront but you have $15k+ in equity.

The real savings: Keep a purchased car 10+ years. That's when buying wins decisively.

Use the Buy vs Lease Calculator to model your specific situation with your actual driving habits, down payment, and interest rates.