Lease vs Buy Calculator

Free Lease vs Buy Calculator: calculate lease vs buy instantly with transparent formula, worked examples and tips. No signup.

A lease vs buy calculator compares the total cost of obtaining a vehicle through a personal contract hire (PCH) or finance lease against outright purchase or hire-purchase (HP) financing. With a lease, you pay a fixed monthly lease payment covering depreciation and a finance charge over the contract term, then return the vehicle with no ownership and no residual value risk. Buying (on loan or outright) means you own the asset and accumulate equity in its residual value, but you bear the full depreciation and any negative equity risk if values fall faster than expected. Loan Payment Calculator models the depreciation component in isolation to inform this comparison.

The correct comparison is total cost of access over the same period, not monthly payments: lease total (deposits plus all monthly lease payments plus any excess mileage penalties) versus buy net cost (purchase price plus finance charges minus residual value at sale or part-exchange).

Enter the vehicle's list or agreed purchase price (the cap cost that determines the monthly lease payment).
For leasing, enter the monthly lease payment, initial rental (deposit equivalent), and contract term in months.
For buying on finance, enter your deposit, interest rate (APR), and loan term.
Enter the expected residual value at end of period for the buy option — what you would sell or part-exchange it for.
Compare total costs: sum of all lease payments vs net buy cost (purchase price plus total interest paid minus residual value).

Lease vs buy cost formulas

Total lease cost = Initial rental + (Monthly lease payment × Term in months) + Excess mileage charges + End-of-contract fees

Total buy cost = Purchase price + Total interest paid − Residual value at sale

Monthly lease payment ≈ (Net cap cost − Residual value) ÷ Term + Monthly finance charge

Worked example: Car list price £28,000. Lease: £250 initial rental + £350/month × 36 months = £12,850 total. Buy: £28,000 + £2,100 interest − £15,000 residual value = £15,100 net cost. Leasing saves £2,250 over 3 years in this scenario before factoring in mileage penalties.

When leasing wins vs buying

Key decision factors

Leasing typically wins when: you want a fixed predictable monthly lease payment with no residual value risk; you change vehicles frequently (every 2–4 years); business users can reclaim VAT on lease payments (50% if any private use, 100% if solely business use). Buying wins when: long-term ownership (5+ years) reduces per-year depreciation cost; you drive high annual mileage (excess mileage penalties eliminate the lease cost advantage); you want equity for the next vehicle. Loan Payment Calculator and Mortgage Calculator model individual cost components to support this decision.

Finance tips and best practices

Negotiate the cap cost (the agreed vehicle price feeding into the lease) just as you would negotiate a purchase — every £1,000 reduction in cap cost reduces the monthly lease payment by approximately £20–28/month on a 36-month term.
Compare total cost of access over the same period, not monthly payments — a lower monthly lease payment over 48 months often costs more in total than a higher payment over 36 months.
Understand your mileage allowance carefully — most personal contract hire contracts charge 3–15 pence per excess mile; high-mileage drivers frequently find buying significantly cheaper over three years.
Check for purchase option fees at the end of a PCP deal — the option-to-purchase fee plus balloon payment can make keeping the car more expensive than part-exchanging or re-leasing.

Approximately 87% of new private cars in the UK are acquired on finance; PCP and PCH lease arrangements account for the majority (Finance & Leasing Association, 2023).
Average UK personal contract hire monthly lease payment for a mid-size family car: approximately £300–400/month including VAT.
Excess mileage penalty rates on UK personal contract hire contracts: typically 3–15 pence per mile above the contracted annual allowance.
Business contract hire VAT reclaim: 50% of VAT reclaimable on lease payments for cars with any private use; 100% reclaimable where solely for business use (HMRC rules).

Common mistakes to avoid

Comparing monthly lease payment to monthly loan payment as though they were equivalent — loan payments build ownership equity; lease payments do not; always compare total cost of access.
Underestimating annual mileage — exceeding the contracted mileage allowance triggers per-mile penalty charges that can eliminate the cost advantage of leasing entirely.
Ignoring fair wear-and-tear standards — vehicles returned with damage beyond manufacturer-accepted wear incur refurbishment charges; repair obvious damage before contract end.
Not factoring GAP insurance — if a leased vehicle is written off, standard insurance pays market value which may be less than outstanding lease liability; GAP cover bridges this shortfall.

Personal contract hire and personal contract purchase are regulated finance products in the UK under the Consumer Credit Act 1974. Business contract hire falls outside consumer credit regulation when the hirer is a business, partnership, or individual acting in a business capacity. Always read the full terms and conditions including mileage allowance, fair wear-and-tear standards, and early termination charges before signing. Business VAT reclaim on leased vehicles depends on private-use arrangements — consult a qualified tax adviser. Early termination charges can be significant; check the contractual calculation before exiting a lease early.