What does the vehicle lease vs buy calculator compare?
The calculator compares three ways to get the same vehicles and use them for the same period: cash purchase, financed purchase with a down payment and monthly installments, and an operating lease with a monthly rent, where the vehicle goes back to the lessor at the end. For each option it builds a monthly cash flow: the purchase or rent, maintenance, insurance and registration, the resale value, and the lease's excess-mileage charge and refundable deposit.
It then works out each option's total net cash, its net present value (NPV), the cost per vehicle per month and the cost per kilometer. It names the cheapest option and the gap to the next one, and shows the monthly rent and the residual value at which leasing and buying cost the same.
When does buying suit your fleet, and when does leasing?
- Buying suits vehicles you keep for a long time. The longer you use a vehicle, the more years share its purchase price, and the lower the cost of each year.
- Leasing preserves cash. You pay fees, a deposit and a monthly rent instead of the full price on day one. That matters when the business has better uses for its money.
- Leasing moves resale risk to the lessor. When you buy, you carry the risk that used prices come in below your estimate. With an operating lease you hand the vehicle back, so its market price does not change your cost.
- Distance decides many comparisons. A vehicle that drives more than the lease allowance pays a charge on every extra kilometer, and an owned vehicle with high mileage resells for less.
What data do you need to compare leasing and buying?
| Input | Where to find it | Tip |
|---|---|---|
| Purchase price | Dealer quote | Include the fit-out you would pay for either way, such as racking or insulation. |
| Residual value | Prices you got for used vehicles, or a dealer buy-back quote | Use a cautious figure and test its effect on the break-even tab. |
| Maintenance, insurance and registration | Last year's invoices and maintenance records | Use the cost of a new vehicle of the same type, not the average of an older fleet. |
| Finance offer | Bank or finance company | Enter the effective annual rate (APR) stated in the offer, and any admin fee in the finance fee field. |
| Lease offer | Leasing company | Check what the rent includes, the distance allowance, the excess-mileage charge, and fees at delivery and return. |
| Distance per year | Odometer readings or trip reports | Use the actual distance of vehicles doing the same work. |
| Discount rate | Finance team | Your borrowing cost or the return the business expects on its money. |
How are the costs of buying and leasing calculated?
The tool works per vehicle, month by month, then multiplies by the number of vehicles. Payments are positive; money received (resale and deposit refund) is negative.
Monthly finance payment (PMT)
If the loan runs longer than the comparison term, the remaining balance is paid off at the end of the term:
Ownership costs and excess mileage
For the lease, maintenance, insurance or registration are added to your cost only when the rent does not include them.
Net present value (NPV)
The option with the lowest NPV is the cheapest. Money you pay in four years costs you less than money you pay today, because you can use it in the meantime.
Cost per vehicle per month and cost per km
The equivalent monthly cost is the level monthly payment with the same present value, so you can set it directly against a monthly rent.
Break-even
Worked example: 10 light commercial vehicles over 4 years
These figures are illustrations, not market prices. A company needs 10 light commercial vehicles, each driving 30,000 km a year, for 4 years. Each vehicle costs $25,000 with an expected residual value of 35% ($8,750). Maintenance is $1,100 in year 1, rising 8% a year; insurance is $1,200 and registration and fees $160 a year. The discount rate is 8%.
- Cash purchase: $250,000 up front. Net cash is $26,647 per vehicle, or $266,467 for the group, with an NPV of $276,547.
- Financed purchase: 20% down ($5,000) and a $20,000 loan at 6% over 48 months. Payment = 20,000 × 0.005 ÷ (1 − 1.005^−48) = $469.70 a month, with $2,546 of total interest per vehicle. Net cash is $291,924, but the NPV is only $269,982, because the finance rate (6%) is below the discount rate (8%).
- Operating lease: $690 a month per vehicle including maintenance and insurance, with a 25,000 km yearly allowance and $0.07 per extra km. Excess distance is 5,000 × 4 = 20,000 km per vehicle, charged $1,400. With a $270 setup fee and a $690 refundable deposit, net cash is $354,300 and the NPV is $304,702.
- Result: the financed purchase has the lowest NPV, followed by the cash purchase at $6,565 more. The equivalent monthly cost per vehicle is $656 financed, $672 cash and $740 leased.
- Break-even: the lease matches the financed purchase at a rent of about $606 a month, or if the residual value falls to 16.1% of the price.
How do you read the comparison?
- NPV sets the ranking. Net cash adds the amounts as they are; NPV accounts for when they are paid. If the two rankings differ, timing is the reason: one large payment today against payments spread over years.
- The yearly cash flow shows the liquidity effect. Compare what each option pays on day one and in each year. A cash purchase needs the full price on day one.
- Break-even shows your negotiating room. The break-even rent is the highest monthly rent at which leasing still costs the same as buying. If the quote is higher, you know how much it has to come down.
- The sensitivity table measures the risk. If the cheapest option changes when the residual value moves by five points, the decision depends on the resale price. Get a written buy-back quote before you decide.
Common mistakes when comparing leasing and buying
- Comparing the installment with the rent only. A loan payment excludes maintenance and insurance; a lease rent may include them. Compare the full cost of each option.
- Ignoring the residual value. An owned vehicle is sold at the end, and its sale price lowers the cost of buying.
- Underestimating distance. Excess-mileage charges arrive at the end of the lease and can change the result.
- Different terms. Compare buying and leasing over the same period of use, or the shorter option looks cheaper for no real reason.
- Mixing amounts before and after tax. Enter every amount on the same basis.
Assumptions and limits
Results are estimates based on the values entered, and the defaults are examples to replace with your own quotes. The calculator assumes loan payments and rent at the end of each month, maintenance spread across the months, insurance and registration at the start of each year, and resale, excess-mileage charges and the deposit refund at the end of the term. It does not include damage charges at lease return, downtime during maintenance, or the tax effect of depreciation, interest or rent. It does not calculate VAT: enter amounts before VAT if your business recovers input tax, or including VAT if it does not. VAT recovery rules can differ between buying and leasing vehicles, so check the current requirements of your tax authority. A lease that ends in ownership (lease-to-own) is treated here as a financed purchase, because you own the vehicle at the end. Check the accounting treatment of leases (under IFRS 16, for example) with your accountant.