Lease vs Buy Calculator

Leasing is better when you want lower monthly payments, plan to upgrade frequently, or use the asset for a short period. It is also beneficial if maintenance costs are included in the lease.

Buying is better for long-term use, building equity, and when asset depreciation is low. Ownership also provides tax benefits through depreciation deductions.

Higher resale value strongly favours buying, as you recover more of your investment. Assets that depreciate rapidly favor leasing since the seller bears the depreciation risk.

Lease payments are typically fully deductible as a business operating expense. When buying, you deduct depreciation and interest costs rather than the full payment. The better tax treatment depends on your specific tax situation and the asset type.

The money factor is the lease equivalent of an interest rate, expressed as a small decimal (e.g., 0.0025). Multiply by 2,400 to convert to an APR. A lower money factor means cheaper financing, just like a lower interest rate on a loan.

In India, buying a car through a loan allows you to claim depreciation if the vehicle is used for business purposes, but personal car loans offer no tax benefits. Leasing a car through a company can provide tax advantages under Section 198 of the Income Tax Act, as lease payments are treated as a business expense. For salaried individuals, buying is generally more economical in the long term, while business owners may benefit from leasing due to lower upfront costs and tax deductibility.

Under GST, leasing is treated as a supply of services, and the lessee can claim Input Tax Credit (ITC) on the GST component of lease payments, subject to standard ITC conditions. When buying, the GST paid on the purchase is also eligible for ITC. For businesses registered under GST, the tax treatment is similar in both cases, but leasing offers better cash flow management since GST on the full purchase price is not required upfront.

In India, Maruti Suzuki cars retain the highest resale value, with approximately 60% to 65% of their original value after 3 years and 45% to 50% after 5 years. Hyundai and Honda retain 55% to 60% after 3 years, while luxury brands like Mercedes and BMW depreciate faster, retaining 50% to 55% after 3 years. These resale values significantly influence the lease versus buy decision, as higher resale value favors buying over leasing.

Indian car leasing companies typically offer operating leases for 2 to 5 years with monthly payments covering depreciation, interest, maintenance, and insurance. The lessee pays an initial deposit equivalent to 3 to 6 months of lease payments. At the end of the lease term, the vehicle is returned to the leasing company without any ownership transfer to the individual. Some companies now offer "lease-to-own" models where a portion of lease payments goes toward eventual purchase, but these are less common.

Buying a used car in India offers the advantage of lower depreciation cost, as the previous owner has already absorbed the steepest depreciation. A 3-year-old car may cost 40% to 50% less than its new price, and you own it outright with no monthly payment after the loan ends. Leasing a new car gives you a vehicle under warranty with predictable monthly costs and no concern about resale value or major repairs. The choice depends on your budget, how long you plan to keep the car, and whether you prefer ownership or flexibility.