How the two costs are compared
The loan's net cost is the deposit, the payments made during the lease term, the balance still owed at the end, minus what the car is worth when sold. The lease's cost is the upfront payment plus the monthly rentals.
That gives the cash each option leaves behind after the same number of months, rather than comparing a 60-month loan payment with a 36-month lease payment.
Worked example
A £30,000 car with a £3,000 deposit on a 7% loan over 60 months costs £534.63 a month. After 36 months the balance is £11,941.07 and the car is worth £18,000, so the net cost of buying is £16,187.83.
Leasing at £399 a month with £2,000 upfront for 36 months costs £16,364. Buying is £176.17 cheaper over the period, because the car is worth more than the balance left on the loan.
What the comparison does not include
Lease mileage limits, wear charges and disposition fees are not included. Add any expected charges to the lease cost.
The resale value is an estimate. If the car is worth less at the end, the loan's net cost rises and the lease may win.
Inputs for the car loan vs car lease calculator
Vehicle price
The cash price of the car.
Deposit with a loan
What you would pay upfront if you bought it.
Loan interest rate (nominal)
The yearly rate on the purchase loan, before monthly compounding.
Loan term
How long the purchase loan runs.
Lease payment
The monthly rental quoted for the lease.
Lease payment due at signing
Any upfront rental, acquisition fee or deposit paid when the lease starts.
Lease term
The comparison period: both options are measured over this many months.
Car value at the end
What you could sell the car for at the end of the lease term.
CALCULATOR QUESTIONS
Car loan vs car lease calculator questions
Is leasing cheaper than buying?
The monthly payment usually is. Over the same period, buying can be cheaper once the car's value is counted.
Which is cheaper in the example?
Buying: £16,187.83 net cost against £16,364 for the lease.
What if I keep the car longer?
The loan becomes cheaper, because payments stop and you still own the car. The comparison only holds for the lease term.
Are mileage charges included?
No. Add any expected excess mileage or damage charges to the lease cost.