Car: Lease vs Buy
Should you lease a car or buy one? We compare the true net cost over how long you'll keep it — including depreciation, maintenance, and resale value.
Your numbers
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Buy the car
Over 5 years, buying works out about ₹4.03L cheaper — the resale value you recover outweighs the lease payments you'd have made.
Net cost to buy (5y)
₹10.97L
Net cost to lease (5y)
₹15.00L
Net cost over time
Should you lease or buy a car?
It hinges on how long you'll keep the car and how fast it depreciates. Buying makes you the owner — you absorb the depreciation, but you keep the resale value. Leasing means fixed payments and no resale, but you sidestep the steepest depreciation and swap cars easily.
As a rule: keep a car a long time → buying usually wins (you spread the depreciation over many years and recover resale). Swap every 2–3 years → leasing can win, because early-year depreciation is brutal and buyers eat all of it.
Why depreciation is the hidden cost
A new car in India can lose 15–20% of its value each year, and the first year is the worst. If you buy and sell after just three years, that depreciation is a real, unrecoverable cost — often larger than the interest on the loan. Leasing effectively pushes that risk onto the lessor.
What the calculator compares
- Buying's net cost = down payment + EMIs + maintenance − what the car is still worth (resale), after settling any remaining loan.
- Leasing's net cost = the sum of lease payments (you own nothing at the end).
Whichever is lower over your holding period wins. Note this is a cost comparison — it doesn't model the opportunity cost of your down payment or lease-vs-own tax treatment (which can matter for salaried car-lease schemes).
When leasing genuinely makes sense
- You want a new car every 2–4 years.
- You value predictable costs and no resale hassle.
- Your employer offers a tax-efficient car lease as a salary perk (this can change the maths significantly — check your specific scheme).
Related tools
- EMI Calculator — the instalment on a car loan.
- Debt vs Invest — is a car loan worth taking, or should you pay cash?
Frequently asked questions
Is it cheaper to lease or buy a car in India?
If you keep a car for many years, buying is usually cheaper because you recover resale value and spread depreciation. If you change cars every 2–3 years, leasing can be cheaper as you avoid the steep early-year depreciation.
Why is depreciation so important in the lease vs buy decision?
A new car can lose 15–20% of its value per year. Over a short holding period that unrecoverable loss often exceeds loan interest, which is why buying-and-selling quickly is expensive and leasing can win.
Does a company car lease change the answer?
Yes. Employer car-lease schemes can offer tax benefits that make leasing considerably cheaper than this general model shows. Check the specifics of your scheme.
Should I factor in the opportunity cost of the down payment?
Ideally yes — money used for a down payment could be invested. This calculator focuses on direct costs; for pure "invest vs spend" logic see the Debt vs Invest tool.