Delaware lease vs buy calculator

What the comparison actually measures

Net cost over a fixed number of years, on both sides, using the same car.

The lease side is simple: the amount due at signing plus the monthly payment multiplied by the months in the comparison window. Nothing is returned at the end, so nothing is subtracted.

The buying side is the down payment plus the loan payments made during the window, plus the payments still to come if the loan runs longer than the window, minus what the car is worth when you are finished with it. That last subtraction is the whole reason the comparison is fair.

Both sides are cash out. Neither side discounts future money back to today, and neither side charges you for the interest you might have earned on the down payment instead. That is a simplification, and on a three-year comparison it is a small one.

The worked example at the default inputs

The calculator opens on a $34,000 car compared over three years. The lease is $399 a month with $3,000 due at signing. Buying means $4,000 down and $30,000 financed at 7.5% over 60 months, with the car worth $20,000 at the end of the three years.

The monthly payments explain most of it. The lease is $399 and the loan is about $601, a difference of $202 a month, because the lease is only paying for three years of the car while the loan is buying all of it.

Over exactly three years, leasing wins by $2,704. That is the correct answer to a narrow question, and the next two sections are about why it is the wrong question for most drivers.

Why is the resale value subtracted from the buying side?

Because at the end of a lease you hand the keys back and own nothing, and at the end of the loan you own a car.

Comparing the money paid alone would show the lease costing $17,364 against $25,641 of buying payments and call the lease cheaper by more than $8,000. That comparison is not measuring the same thing on both sides. One of the two people involved is standing next to a $20,000 asset.

Subtracting the resale value fixes it. It is also, exactly as in the true cost of ownership calculator, the input the answer is most sensitive to. Lower the resale figure from $20,000 to $16,000, changing nothing else, and the buying net cost rises from $20,068 to $24,068, so the lease advantage grows from $2,704 to $6,704. Guess the resale value badly and you have guessed the answer badly.

How the "still owed at the end" line works

It is the sum of the payments still scheduled, not a discounted payoff figure.

At the defaults the loan runs 60 months and the comparison runs 36, so 24 payments of about $601 remain, and the tool shows $14,427. A lender asking for a payoff on that date would quote slightly less, because a payoff settles the balance rather than the remaining instalments and the unearned interest comes off.

The effect of counting it this way is that the buying side is charged the full cost of the loan whatever window you choose. That is why the buy net cost is $20,068 over three years and still $20,068 over five: the same $4,000 down, the same 60 payments and the same $20,000 car, simply reported at a different moment. It is a conservative treatment of buying, and it is worth knowing about before you read the gap as precise.

Shorten the loan instead. Set the term to 36 months so the loan and the comparison end together, and the payment rises to $933, the buying net cost falls to $17,595, and the lease advantage collapses from $2,704 to $231. Nothing about the car changed. Only the borrowing did. Our loan guides go through what term does to total interest.

A second example: comparing over five years and seven

Change the years field from 3 to 5 and leave everything else.

The lease side becomes $26,940, because a lease payment does not stop. The buying side is unchanged at $20,068, because the loan is now fully repaid inside the window. Buying costs less by $6,872.

Run it over seven years, with the resale value cut to $12,000 to reflect the extra age, and the lease total climbs to $36,516 against a buying net cost of $28,068. Buying wins by $8,448.

That is the shape of the whole question, and it is not close:

• Over a short window, leasing usually wins, because the lease payment covers only the years of the car you use.
• Somewhere around the point the loan is repaid, the lines cross.
• After that, buying wins by more every year, because the payments have stopped and the lease payments have not.

If you know you will keep a car past the end of a loan, the answer is already decided and this tool will only tell you by how much.

The mistakes that make a lease look cheaper

• Comparing monthly payments. The $399 lease against the $601 loan is not a like-for-like comparison. One of them ends with a car.
• Choosing the window to suit the answer. Three years flatters the lease, seven flatters buying. Use the number of years you will actually keep the arrangement, not the one that gives the answer you want.
• Ignoring the mileage limit. This is where leases become expensive. Excess mileage is typically charged around 20 to 25 cents a mile at hand-back, and none of it is in the figures above. Ten thousand miles over a limit is a four-figure bill on a car you are returning.
• Forgetting wear-and-tear and the disposition fee. Kerbed wheels, a scuffed bumper and worn tyres are assessed at the end, and most leases charge a disposition fee on top for taking the car back. Neither is priced here.
• Leasing repeatedly. A driver who leases continuously always has a payment, and never reaches the years where a paid-off car is cheap. That is a lifestyle decision rather than a financial one, and it deserves to be made deliberately.
• Assuming an optimistic resale value. It is the most sensitive input on the buying side. A $4,000 error moves the comparison by $4,000.

What a lease charges that this tool does not price

Leases carry costs the buying side has no equivalent for, and none of them are in the arithmetic above:

• Mileage limits. The single largest hidden cost. Read the annual allowance and the per-mile excess charge before anything else in the contract.
• Wear-and-tear standards. Defined in the lease, assessed at hand-back, and not always what a reasonable person would call fair wear.
• The disposition fee. Charged at the end of most leases for returning the car.
• Acquisition and documentation fees. Sometimes rolled into the amount due at signing and sometimes not, so check which figure you have entered.
• Early termination. Ending a lease early is usually expensive and is not always possible. A loan can be settled by selling the car.
• Insurance requirements. Leases commonly require higher coverage limits than a driver would otherwise carry, which is a real monthly difference. Our insurance section covers what moves a premium.
• Gap cover. Often required, sometimes included, and worth confirming rather than assuming.

Neither side includes fuel, maintenance, tyres, registration or tax, which are broadly similar on the same car either way. If you want the whole picture rather than the lease-against-loan slice, run the vehicle through the ownership calculator as well.

What should you check on a lease quote?

• Confirm the annual mileage allowance and the charge for every mile over it
• Ask what the total amount due at signing includes, fee by fee
• Ask for the disposition fee and the wear-and-tear standard in writing
• Check whether the quoted payment includes sales tax, which varies by state
• Ask for the residual value and the money factor, not only the payment
• Get a purchase quote on the identical vehicle so the comparison uses one car
• Decide honestly how long you will keep it, then run this tool at that number of years

The Federal Reserve publishes a plain-language guide to vehicle leasing that explains the residual value and money factor in more detail than a dealer worksheet usually does. Read it before signing rather than after.

This page is arithmetic, not a recommendation to lease or to buy, and no figure here is an offer. See the disclaimer.