Car buy vs lease calculator UK: what it does and why it helps

Choosing between buying and leasing a car usually starts with a monthly payment and ends in guesswork. One dealer quotes a PCP at £360 a month, a leasing broker quotes a PCH at £330, and you are somehow meant to work out which one is cheaper over the years you will actually have the car.

That gap is what the calculator above is for. Enter the figures from your quotes and it compares buying with HP finance, PCP finance or cash against a personal contract hire (PCH) lease. You get the full cost of each over the same period: deposit, monthly payments, road tax, servicing, excess mileage, end-of-lease charges and what the car should be worth when you sell it. If you have been searching for a lease vs buy car UK tool, a PCP vs PCH calculator, or a car finance calculator that looks beyond the monthly payment, this one is built for exactly that.

It is free, there is nothing to sign up for, and nothing you type leaves your device. Car leasing vs buying has no single right answer, only a right answer for your mileage, your budget and how long you keep a car. The rest of this page explains how to use every part of the calculator, how the numbers are worked out and how to read the result.

PCP vs PCH: the difference in plain English

On a quote the two look alike: an initial payment, then a fixed amount each month for two to four years. What differs is who owns the car and what happens at the end.

PCP (personal contract purchase) is a way of buying a car on finance. Your monthly payments cover the car's expected fall in value plus interest, and a large optional final payment, the balloon payment, is pushed to the end. Lenders also call it the guaranteed minimum future value (GMFV). When the term finishes you can pay the balloon and keep the car, part-exchange it, or hand it back.

PCH (personal contract hire) is a long rental. You pay for the car's fall in value plus finance charges and fees, you never own the car, and there is no balloon. At the end you simply hand it back.

Early exit works differently as well. Regulated HP and PCP agreements normally let you end the contract once you have paid half of the total amount payable, while leases are usually harder and more expensive to leave early. Check the wording in your own agreement before you rely on either.

If you are certain you will hand the car back, PCH is often the cheaper route, because you are not paying interest on a balloon you never intend to pay. If there is a realistic chance you will keep the car, PCP leaves that door open. To see the gap with your own numbers, set the buy side of the calculator to PCP and compare it with the lease side. That makes it a quick PCP vs leasing check.

HP vs PCP vs lease: how the options compare

Leasing is only half of the choice. On the buying side there are three routes, and they behave quite differently once you add up the cost.

HP (hire purchase) spreads the whole price, plus interest, over the term. Payments are higher than on a PCP, but there is no balloon and the car is yours after the last payment. If you want to see how a plain loan behaves over different lengths, our UK loan repayment calculator shows it in seconds.

PCP keeps the monthly payment lower by deferring a chunk of the price to the balloon. The catch is that interest is charged on that larger balance for the whole term, so if you do pay the balloon and keep the car, a PCP usually costs more in total than an HP at the same APR.

Cash avoids interest altogether, but the money is tied up in the car. That has a cost of its own, because the same cash could have earned interest in a savings account. The calculator has a savings rate box for exactly this, so you can put a figure on it.

Should I buy or lease a car? Five questions to ask first

There is no universal answer, but five questions usually decide it.

• How long do you keep a car? If you tend to keep cars for six years or more, buying usually works out cheaper per year, because a lease starts again with a fresh initial rental every time. If you like a newer car every three years and dislike selling one, leasing removes that job.
• How many miles do you drive? A lease comes with a mileage allowance and charges for every mile over it. The table further down shows how quickly that adds up.
• Can you cover the upfront money? An HP or PCP deposit and a lease initial rental both need cash on day one. The Insights tab in the calculator shows how much each side needs.
• How much resale risk are you happy to carry? With a lease, or a PCP you hand back, the finance company carries the risk of the car being worth less than expected. With HP or cash that risk is yours, and it is the biggest unknown in any buy vs lease comparison.
• Do you want to own something at the end? If owning matters to you, a lease will never give you that. If you see a car as a monthly cost rather than an asset, the picture changes.

What going over your mileage allowance costs

Excess mileage is the cost people underestimate most. The calculator multiplies the extra miles you drive each year by the number of years and by the pence-per-mile rate in your contract. Here is how that looks on a three-year lease with an 8,000 mile allowance and a rate of 8p a mile.

Based on a 36-month term. Check the pence-per-mile rate in your own contract, because it varies between lenders.

If your real mileage sits well above the allowance, it is often cheaper to pay for a higher allowance up front than to pay the excess later. Run the calculator once for each allowance on your quotes and compare the totals.

How to use this car lease vs buy calculator

The calculator has three parts: a shared strip at the top, a Buy card and a Lease card. On a phone the Buy and Lease cards turn into two tabs, so everything stays on one screen. It opens with example figures already filled in so you can see it work. Replace them with the numbers from your own quotes, press Compare costs, and the result appears straight away. Here is the order that works best, and what every box is for.

Step 1: Start with the shared details

• Term. Pick 24, 36, 48 or 60 months, or choose Custom and type any length from 1 to 120 months, for example 42 for an odd-length lease. The same term applies to both sides, so the comparison is like for like.
• Fuel. Choose Petrol, Diesel, Hybrid or Electric. This only affects the automatic resale estimate, where an electric car is assumed to hold somewhat less of its value. It does not change your road tax, because you enter that yourself.
• Road tax. Type what you pay each year, from your V5C or your quote, and enter 0 if the car is tax-exempt. The figure is used for every year of the term. The calculator does not guess it, because road tax depends on when the car was registered, its emissions and its price, and older cars can pay something quite different from newer ones. The box starts empty on purpose, and the calculator will not run until it has a figure.
• Miles a year. Your realistic yearly mileage. Drag the slider, or push it to the end and type an exact figure beyond the limit. It drives the excess-mileage charge, the cost-per-mile figure and the automatic resale estimate, which falls as mileage rises.

Step 2: Fill in the buy side

• Pay with. Choose HP finance, PCP or Cash. With Cash the deposit and APR boxes disappear, because you pay the full price at once.
• List price. The price of the car before any discount. If the dealer is knocking something off, enter that later in More options.
• Deposit. What you pay up front. It must be less than the price. If you are paying everything up front, choose Cash instead.
• APR. The APR on your finance quote, as a percentage a year. A 0% deal works too.
• Balloon (GFV). PCP only. This is the optional final payment on your quote. Until you have one, the calculator suggests a starting figure marked auto, set at roughly 92% of the expected resale value. Replace it with the number from your quote as soon as you have it.

Step 3: Fill in the lease side

• Monthly rental. The rental on your lease quote. Personal lease prices are normally shown including VAT, while business prices often leave it out, so check which one you are looking at. If a quote is without VAT, our UK VAT calculator will add it on.
• Upfront payment. This is the initial rental. Choose 1×, 3×, 6×, 9× or 12× the monthly rental, or pick Custom and type the exact amount from your quote. A line underneath spells out the pattern, for example Upfront £1,974, then 35 payments of £329. The calculator counts the initial rental plus the remaining rentals, which is how a 6+35 lease on 36 months works.
• Allowance. Your annual mileage allowance. Like the miles slider, you can drag it or type a figure beyond the end.
• Excess. The pence per mile you pay for going over the allowance. Both figures are in your lease contract.

Step 4: Open More options for the extras

The gold More options button in the banner opens a panel with three tabs. A small badge on the button counts how many extras you have changed, so you can always tell whether anything behind the scenes is affecting the result.

Buy tab

• Dealer discount. Money off the list price. The loan and deposit work from the discounted price, and the discount must be smaller than the list price. To turn a percentage discount into pounds, use our discount calculator.
• Resale at end. What you expect to sell the car for at the end of the term. It starts as an automatic estimate based on the price, term, fuel and mileage, marked auto. The moment you type your own value the auto tag disappears, and the use the estimate again link brings it back.
• Finance fees. Any arrangement or option-to-purchase fee on the HP or PCP. This box is hidden when you pay cash.

Lease tab

• Arrangement fee. The admin or documentation fee some lease providers charge.
• End-of-lease charges. Anything you expect to pay when the car goes back, such as damage beyond fair wear and tear.
• Servicing. Switch to Included if your lease is a maintained one. This switch also covers the MOT fee. Otherwise the calculator adds your yearly servicing cost to the lease side as well.
• Road tax. Included by default, because most leases include it. Switch it to Not included and your yearly road tax figure is added to the lease side too.

Running tab

• Servicing a year. Your estimate of a yearly service. It is applied to the buy side for every full year of the term, and to the lease side unless servicing is included. On terms longer than three years the calculator also adds the MOT test fee from year four.
• Insurance + fuel a year. Optional. The same amount is added to both sides, so it will not change which option wins, but it makes the monthly and per-mile figures closer to real life. If you need a number for fuel, try our fuel cost calculator, and for an electric car, public and home charging prices vary a lot too.
• Savings rate. If the money you pay up front would otherwise sit in savings, enter the yearly interest rate. The calculator adds the interest you give up on cash paid out early to each side, which matters most for a cash purchase or a big deposit. Leave it at 0 to ignore it. To see what a lump sum could earn, the compound interest calculator shows it.

Step 5: Press Compare costs and read the result

If something is missing or does not make sense, for example a deposit bigger than the price or a balloon bigger than the loan, the calculator stops and tells you what to fix. When the problem sits inside More options, it opens that panel for you.

• The headline panel. The dark panel at the top names the cheaper option and the saving over the whole term, with the monthly difference underneath. Two lanes show the total and the monthly cost of Buy and Lease side by side. If the two are within a pound of each other, it says too close to call.
• Breakdown tab. Every cost line for both sides, with a coloured bar showing where the money goes. The lines always add up to the net cost at the bottom.
• Over time tab. A chart of the cash paid out month by month. Hover over it or tap it to see any month. If the car is sold at the end, a dashed drop on the Buy line shows what you get back.
• Insights tab. Six tiles that answer the follow-up questions, explained in the table below.
• Edit inputs and Reset. Edit inputs takes you back to change something, with everything you entered still in place. Reset clears the lot, including road tax, and starts again.

Four ways to get more out of it

• Compare terms. Change 36 months to 24 and to 48 and watch how the gap moves. A longer term lowers the monthly payment on the buy side but adds interest, so look at the total as well as the monthly figure.
• Stress-test the resale value. Take £2,000 off it and see whether the winner changes. If it does, the decision is fragile.
• Switch Pay with. Flip between HP, PCP and Cash for the same car. It turns the page into a quick HP vs PCP vs lease comparison.
• Check the break-even resale. Ask yourself honestly whether the car will sell for that much. If not, leasing wins, and if it will comfortably, buying does.

A worked example: buying vs leasing over 36 months

To show how this plays out, here is a run using the calculator's starting figures plus an example road tax of £180 a year. That road tax figure is only for the example, so use your own. The car lists at £32,000 with a £3,000 deposit, a 7.9% APR and a 36-month term. You drive 8,000 miles a year and expect to sell the car for £16,100 at the end. Servicing is £250 a year. The lease is £329 a month with six rentals paid up front, road tax included and an 8,000 mile allowance. For the PCP, the optional final payment is £14,800. Type the same figures into the calculator above and you will see the same totals.

Net cost is everything you pay out minus what you sell the car for. The PCP figure assumes you pay the balloon and sell the car.

The lease comes out cheapest at £14,239, which is about £396 a month once everything is counted. Buying with cash costs £17,190 net, but it needs £32,000 on day one and gives up whatever that money could have earned. HP lands at £20,726 and the PCP at £22,308. The PCP costs more than the HP here because interest runs on the balloon for the whole term: £5,118 of interest against £3,536.

Cash is the interesting one. Add a 4% savings rate in More options and the cash purchase rises from £17,190 to £21,260, because £32,000 paid on day one gives up three years of interest. The lease only moves to £15,220.

The number that decides it: resale value

Change one figure and the picture changes. The chart below shows the net cost of buying with HP at different resale values, with the dashed green line marking the lease cost of £14,239. Buying only beats the lease if the car sells for about £22,587, which is the break-even resale figure on the Insights tab. That is well above the £16,100 estimate, so in this example the lease wins unless the car holds its value unusually well.

Where the cash goes

Before the sale, the HP route pays out £36,826 over three years, of which £32,536 is monthly payments. The lease pays out £14,239. Buying gets £16,100 of that back when you sell, which is why the net figures sit closer together than the cash out.

These are example figures, not a quote. A car that holds its value well, or a lease with a large initial rental, can swing the result the other way. Put your own quotes into the calculator above to see where you land.

How the maths works behind the calculator

You do not need the formulas to use the calculator, but they are here if you want to check the working or build your own spreadsheet.

Payments are rounded to the penny, the way a lender would round them, and then multiplied by the number of months, so the totals match what you would actually pay.

Timing matters too. Road tax is charged at the start of each year, servicing at the end of each full year, and the first MOT test fee is added at the start of year four, because a new car does not need its first MOT until it is three years old. The Over time chart uses the same timings, so the lines step up when those bills land.

What it leaves out. Business tax treatment, VAT recovery, differences in insurance cost between the two routes, part-exchange equity, GAP insurance and early termination charges are not modelled. Anything you know about can be added through the extras in More options, and anything bigger is worth asking your lender, broker or accountant about.

Mistakes to avoid when comparing buy vs lease

• Comparing monthly payments only. A lease with six rentals up front and a PCP with a big balloon can look similar each month and be very different in total.
• Forgetting the upfront money. The initial rental counts, and so does the deposit.
• Trusting a resale figure you have not checked. A £2,000 difference in what you sell for moves the buy side by £2,000, pound for pound. Look at a few real adverts for the same model, age and mileage before you settle on a number.
• Ignoring the mileage clause. Pick the allowance you will really use. Choosing a low allowance to get a headline price only moves the cost to the end of the contract.
• Leaving out the small bills. Road tax, servicing, the MOT and end-of-lease charges all belong in the comparison, on whichever side pays them.
• Not reading the early-exit terms. Circumstances change. Know what it would cost to leave before you sign, not after.

Frequently asked questions

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