The lease vs buy car calculator compares the total cost of leasing versus purchasing a vehicle in Canada. Enter the vehicle price and financing details to see a side-by-side breakdown of monthly payments, total cost, equity, and the true cost difference over your ownership period.
How this calculator works
Enter the vehicle MSRP, your down payment, loan term and rate (for buying), monthly lease payment and residual value (for leasing), your province for sales tax, and expected resale value. The calculator computes the total cost of each option including taxes, interest, depreciation, and equity.
Lease vs buy: the real comparison
The key insight most people miss is that you are paying for depreciation either way. When you lease, you pay for the depreciation directly (the difference between MSRP and residual value). When you buy, you pay for depreciation indirectly through the difference between your purchase price and eventual resale value.
Cost breakdown comparison (example: $45,000 vehicle)
| Factor | Buy (60 months, 6.5% loan) | Lease (48 months, $499/mo) |
|---|---|---|
| Monthly payment | $880 | $499 |
| Total payments | $52,800 | $23,952 |
| Down payment | $5,000 | $2,000 |
| Sales tax (ON 13%) | $5,850 (upfront) | ~$3,114 (on payments) |
| Total out of pocket | $63,650 | $29,066 |
| Vehicle value after 4 years | ~$25,000 | $0 (returned) |
| Net cost (4 years) | $38,650 | $29,066 |
| Net cost (8 years) | $38,650 | $58,132 |
Leasing wins in the short term. Buying wins when you keep the vehicle beyond the loan payoff period.
When leasing makes sense
- Business use — Lease payments are directly deductible (up to CRA limits)
- Short ownership — You prefer a new vehicle every 3-4 years
- Cash flow priority — You need lower monthly payments
- Low mileage — You drive under 20,000 km/year
- Technology preference — You want the latest safety tech and EV improvements
- Credit building — Leases can be easier to qualify for
When buying makes sense
- Long ownership — You keep vehicles 7+ years and enjoy payment-free years
- High mileage — You drive over 20,000 km/year (avoiding lease penalties)
- Equity building — You want an asset to sell or trade later
- Customization — You want to modify or personalize the vehicle
- Cost minimization — Buying and holding is the lowest total cost over time
- Paid-off period — Years without a payment dramatically reduce your average annual cost
The “invest the difference” factor
Some financial planners suggest leasing and investing the difference between lease and buy payments. Per the example above:
- Monthly savings from leasing: $880 − $499 = $381
- Over 48 months invested at 7% return: ~$20,600
- Combined lease cost + investment growth: $29,066 − $20,600 = $8,466 net cost
However, this requires actually investing the difference consistently. In practice, most people spend the savings rather than invest them.
Mileage penalties
Most leases include a mileage allowance of 16,000–24,000 km/year. Excess charges range from $0.08 to $0.20 per km.
| Excess km/Year | Rate | Extra Annual Cost |
|---|---|---|
| 5,000 km | $0.12/km | $600 |
| 10,000 km | $0.12/km | $1,200 |
| 15,000 km | $0.12/km | $1,800 |
If you drive significantly more than the allowance, buying is almost always cheaper.
Business lease tax deductions
If you use a leased vehicle for business, the CRA allows deducting lease payments as a business expense, subject to limits.
| Deduction | 2026 filing guidance |
|---|---|
| Maximum deductible monthly lease payment | CRA prescribed monthly lease-cost limit (updated periodically) |
| Maximum deductible monthly interest (if buying) | $300/month |
| Basis | Proportional to business-use percentage |
For tax planning in 2026, verify the current prescribed lease and interest limits on the CRA site or with your accountant before you finalize your return.
Example: You lease a vehicle for $800/month and use it 60% for business. Your deductible amount is $800 × 60% = $480/month ($5,760/year). If you are self-employed or operate through a corporation, this directly reduces taxable income.
Lease-end options
| Option | When it makes sense |
|---|---|
| Return the vehicle | Most common — walk away and start fresh |
| Buy out at residual value | Good deal if the vehicle’s market value exceeds the residual price |
| Lease a new vehicle | Continue the cycle for a new model with latest features |
| Negotiate return charges | Excess mileage or wear-and-tear fees can sometimes be reduced |
Related calculators
- Car Loan Calculator — Calculate car loan payments for buying
- Car Affordability Calculator — Determine how much car you can afford
- Budget Calculator — Plan your monthly vehicle budget
- Sales Tax Calculator — Calculate HST/GST on a vehicle purchase
- Savings Goal Calculator — Save for a car down payment
- Investment Calculator — Model the “invest the difference” scenario