Car Lease vs Buy Calculator

Leasing, formally Personal Contract Hire, means paying a fixed monthly amount to use a car for 2 to 4 years with no option to own it at the end. You never own the vehicle, but monthly costs are predictable and often include a maintenance package. Mileage limits apply, typically 8,000 to 15,000 miles a year, with excess charges of 5 to 15p per mile if you go over. Mid-range cars generally lease for £200 to £600 a month.

Buying outright or through hire purchase means you own the car and can sell whenever you choose. The true cost of buying is not the monthly payment, though, but depreciation, interest if you financed it, insurance, maintenance and road tax added together. Because depreciation slows as a car ages, buying is usually cheaper over five years or more, once you have absorbed the steep early loss and start enjoying the flat part of the curve.

Enter the car price, the lease monthly, term and initial payment, then the finance deposit, APR, finance term and an annual depreciation rate, which sets the resale value. The calculator compares both routes over the lease term, settling any finance still owed at the end. On a £28,000 car, a lease at £300 a month for 36 months plus a £900 initial rental comes to £11,700. Hire purchase with a £2,800 deposit at 7.9% APR over 36 months costs £785.35 a month, £31,073 in all, and at 20% a year depreciation the car is worth £14,336, a net cost of £16,737. Leasing is £5,037 cheaper here. Buying pulls ahead only if you keep the car well past the finance term.

The terms of a lease deal deserve a careful read before you sign. The initial rental is quoted as a number of months paid upfront, typically between 3 and 12, and the more you pay at the start the lower the monthly figure. Mileage caps come in steps of 5k, 8k, 10k, 12k, 15k and 20k a year, and going 10,000 miles over on a three-year deal can cost £800 or more. Maintenance is an optional extra of £20 to £50 a month covering servicing, tyres and MOT. Insurance is never included. At handback the car is inspected against a fair wear and tear standard, and chips, scratches and dents can be charged at £50 to £500 or more each.

Leasing suits people who always want a new car and do not want the bother of selling every two or three years. It also suits anyone unwilling to carry depreciation risk, which on a £30,000 car runs to 40 to 50% over three years and can exceed 60% on premium German marques. A £30,000 car leased at £300 a month for three years costs £10,800 and leaves you with nothing, while buying the same car outright and selling for £18k costs £12k. Business users can deduct lease costs against tax, limited capital stays free for other uses, and many contracts fold servicing in.

Buying wins for people who keep cars a long time. Past five years the depreciation curve flattens and every further year of ownership is cheap, whereas a lease hands the car back at the point it becomes good value. Low-mileage drivers doing under 7k miles a year find lease caps needlessly restrictive, anyone who wants to modify a car cannot do so on a lease, and a car without secure parking risks handback damage charges for marks nobody would notice on their own vehicle. Buying a car that is already three years or more old avoids the worst of the depreciation entirely.

Between the two sits Personal Contract Purchase, a hybrid of monthly payments and a balloon amount at the end that you can either pay to keep the car or walk away from, and it is usually dearer month to month than a straight lease. The one arrangement that beats both, if your employer offers it, is electric car salary sacrifice. The payment comes out of gross pay, so a £600 a month sacrifice saves a basic-rate taxpayer 28% (20% tax plus 8% NI) and a higher-rate taxpayer 42% (40% plus 2%), cutting take-home pay by £432 or £348. Benefit in kind on electric cars is 4% in 2026/27, rising to 5% in 2027/28 and 7% in 2028/29. On a £40,000 car that adds £27 or £53 a month in tax, for a net cost of about £459 or £401, a saving of roughly a quarter to a third.