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Pick when you got the car and how long you'd keep it. This replays real car loan rates, used car prices and investment returns to compare a lease, a car loan and paying cash.
Car loan
Lease
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Every choice starts with the same savings and spends the same each month. Whatever one doesn't spend on the car, it saves.
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This lease vs buy car calculator replays three ways of having the same car: paying cash, a loan or a lease. In the UK that is buying outright, hire purchase (HP) or personal contract hire (PCH); in the US, cash, an auto loan or a lease. PCP is not one of the paths.
All three start with the same savings, enough to buy the car new for cash, and spend the same each month. Whichever spends less on the car that month saves the difference, and the savings grow with the S&P 500, savings rates or nothing, as you choose. The car loses value on a standard curve, moved with used car prices as they really changed.
Pick UK or US, the January you got the car (from 2000 on), how long you keep it, and new or 3 years old. The loan rate is that month's real average: the Bank of England personal loan rate, or the Federal Reserve new car loan rate. The price is an example car taken back with the new car price index, and the lease payment is estimated from it. A UK lease starts with six rentals as the initial rental; a US lease with the first payment plus $1,000 in fees due at signing. A lease counts like rent: if the years you keep a car end part way through a lease, the payments still to come aren't counted, since they pay for the months of car still to come. You can type over the price, rate, monthly lease and upfront amount, and set the deposit or down payment. For lease or buy a car, or car finance vs cash, this is history replayed, not a forecast.
These use the calculator's starting figures for one UK and one US case, and are refreshed when the data updates.
Getting a new £22,500 car in January 2018 and keeping it 5 years, buying it on car finance would have left you £3,090 better off than leasing; paying cash, £1,834 worse off. £3,090 better off buying on finance than leasing.
Getting a new $28,900 car in January 2018 and keeping it 5 years, buying it with a car loan would have left you $8,589 better off than leasing; paying cash, $4,611 better off. $8,589 better off buying with a loan than leasing.
It depends on the years you had the car: loan rates, how used car prices moved, and what the money not spent on the car earned. Pick UK or US, the year you got the car and how long you keep it above, and the chart shows how far ahead of leasing, or behind it, paying cash and a loan came out over those years. Try 3 years kept against 10 to see how much the answer moves.
With UK picked, contract hire (PCH, personal contract hire) is the lease path, with six monthly rentals paid up front as the initial rental by default. Car finance (HP, hire purchase) is the loan path, with a deposit of none, 10% or 20% and a rate from the Bank of England's average on a £10,000 personal loan. Paying cash is buying outright.
PCP is not one of the paths here. It works like car finance with a large final (balloon) payment: pay it and you keep the car, which ends up closer to HP; hand the car back instead and it behaves more like a lease. The finance line and the Leasing line above give a rough sense of either end, but PCP's own rates, balloon and mileage limits are not modelled.
Buying outright is the cash path: the whole price leaves your savings on day one, so that money stops growing. PCP isn't modelled, but HP is, and the gap between the cash and finance lines shows whether borrowing at that year's rate, while the money stayed invested, would have paid off. A deposit of none keeps the most money invested at the start.
In this replay, finance comes out ahead when the savings it kept invested grew by more than the loan's interest, and cash comes out ahead when they didn't. With stock market returns picked, that depends heavily on the years chosen. Switch the returns assumption to savings rates or to nothing to see how much of the answer comes from the stock market.
Like rent. If the years you keep a car end part way through a lease, the payments still to come on it aren't counted against the lease: they pay for the months of car still to come, as next month's rent pays for next month's home. Ending a lease early usually costs extra, and that isn't modelled.
Insurance, fuel, lease mileage limits and end-of-lease charges are left out on every path. So is tax: US sales tax, UK road tax, and tax on investment growth, which is counted in full with no ISA, 401(k) or other wrapper. The car's value follows a standard depreciation curve moved with used car price indices, not the price of any particular model.