Lease vs Buy Car Calculator
Compare total costs and make the right choice for your car acquisition in India
Car Price
Base price applies to both scenarios
₹
₹5L₹50L
Buy Car
Own Asset
Monthly EMI
₹25.20 K
Lease Car
No Ownership
Amount to purchase the car at lease end: 50% (₹7.50 L)
Monthly Lease Payment
₹25.05 K
Common Costs & Assumptions
Lease the Car
Leasing saves you money in this scenario
Potential Savings
₹5.64 L
Buy
Total Cost (After Resale)
₹19.85 L
Ownership included
Resale value: ₹6.00 L
Lease
Total Cost
₹14.21 L
No ownership
Lower monthly payments
Total Cost Comparison
Buy Car (Net Cost)
₹19.85 L
After resale: ₹6.00 L
Lease Car (Total Cost)
₹14.21 L
No ownership at the end
Detailed Cost Breakdown
Buy Car Cost Distribution
Lease Car Cost Distribution
Buy Breakdown
Down Payment₹3.00 L
Loan/Lease Payments₹15.00 L
Insurance₹1.25 L
Maintenance₹1.80 L
Fuel₹4.80 L
Resale Value-₹6.00 L
Lease Breakdown
Down Payment₹50.00 K
Loan/Lease Payments₹9.00 L
Insurance₹75.00 K
Maintenance₹1.08 L
Fuel₹2.88 L
Detailed Comparison Table
| Category | Item | Buy Car | Lease Car |
|---|---|---|---|
| Initial Costs | Down Payment | ₹3,00,000 | ₹50,000 |
| Security Deposit | ₹0 | ₹75,000 | |
| Financing Costs | Loan/Lease Amount | ₹12,00,000 | ₹0 |
| Interest Rate | 9.5% p.a. | N/A | |
| Tenure | 5 years | 3 years | |
| Monthly Payment | ₹25,000 | ₹25,000 | |
| Total Payments | ₹15,00,000 | ₹9,00,000 | |
| Interest Paid | ₹3,00,000 | ₹0 | |
| Recurring Costs | Insurance | ₹1,25,000 | ₹75,000 |
| Maintenance | ₹1,80,000 | ₹1,08,000 | |
| Fuel | ₹4,80,000 | ₹2,88,000 | |
| End of Term | Resale Value | ₹6,00,000 | ₹0 |
| Residual Value (Buyout Option) | N/A | ₹7,50,000 | |
| Asset Ownership | Yes | No (Yes if bought) | |
| Total Cost Analysis | Total Cost (Lease Only) | ₹25,85,000 | ₹14,21,000 |
| Total Cost (After Buyout) | N/A | ₹21,71,000 | |
| Net Cost (After Resale) | ₹19,85,000 | ₹14,21,000 | |
| Final Net Cost | ₹19,85,000 | ₹14,21,000 | |
Recommendation: Lease the Car
Leasing is more economical for this scenario. You'll save ₹5,64,000 compared to buying.
Understanding Residual Value
What happens at the end of your lease term?
Residual value is the predetermined price you can pay to purchase the leased vehicle at the end of your lease term. It represents the estimated value of the car after the lease period, typically calculated as a percentage of the original car price.
How It Works
- •Set at the beginning of the lease (typically 30-70% of car price)
- •Based on expected depreciation over the lease term
- •Your buyout option at lease end
Your Options at Lease End
- 1.Return the car - Walk away with no further obligation
- 2.Purchase at residual value - Own the car by paying the predetermined amount
- 3.Extend the lease - Continue leasing if allowed
Important:If the market value of the car exceeds the residual value at lease end, buying it can be a smart financial decision. However, if the market value is lower, returning the car is typically better.
Key Considerations
When to Buy
- Planning to keep the car for 5+ years
- Can afford 20-30% down payment
- Want to build an asset and ownership
- Drive more than 20,000 km annually
- Prefer freedom to customize
- Want to benefit from resale value
When to Lease
- Need a car for 2-3 years only
- Prefer lower monthly payments
- Want to drive new cars frequently
- Use car primarily for business
- Drive less than 15,000 km/year
- Don't want resale hassles
Tax Implications in India
For Buying:
- • Depreciation benefit for business use (15-30%)
- • Interest deduction on car loan (business use)
- • Road tax and insurance deductible
- • Limited GST credit availability
For Leasing:
- • Entire lease payment is tax-deductible (Sec 31)
- • Simplified accounting as operational expense
- • GST on lease may be eligible for credit
- • Better for businesses with tax optimization
Watch Out for Hidden Charges
Buying:
- • Registration & road tax (8-14%)
- • Loan processing fees (1-2%)
- • Prepayment charges
- • Extended warranty costs
Leasing:
- • Excess mileage charges (₹8-15/km)
- • Wear and tear penalties
- • Early termination fees
- • Disposition/return charges
Frequently Asked Questions
Get answers to common questions about car leasing vs buying in India
What is the difference between leasing and buying a car in India?
When you buy a car, you own the vehicle outright (or after loan repayment). You can customize it, sell it anytime, and benefit from its resale value. When you lease a car, you're essentially renting it for a fixed period (typically 2-4 years). You don't own the car, have mileage restrictions, and must return it at the end of the lease term. The key difference is ownership - buying builds equity, while leasing offers lower monthly payments without long-term commitment.
Who should opt for car leasing in India?
Car leasing is ideal for business professionals who can claim tax deductions, people who prefer driving new cars every 2-3 years, those who want lower monthly payments, individuals who drive limited kilometers annually (under 15,000 km/year), companies providing cars to employees, and people who don't want resale hassles. Self-employed professionals and businesses can claim lease payments as business expenses under Section 31.
Who should buy a car instead of leasing?
Buying a car is better for people who want to own an asset and build equity, those planning to keep the car for 5+ years, drivers who exceed typical mileage limits (20,000+ km/year), people who want to customize their vehicle, those who don't want monthly payment obligations indefinitely, and individuals who can afford higher down payments. After loan repayment, you own the car outright and can recover significant value through resale.
What are the tax implications of leasing vs buying a car in India?
For Buying: Businesses can claim depreciation (15-30%), interest deduction on car loans, road tax & insurance as business expenses, and limited GST credit. For Leasing: Entire lease payment is tax-deductible as business expense under Section 31, simplified accounting, GST on lease may be eligible for credit. Note: Tax benefits apply primarily to business use. For personal use, there are limited tax deductions for either option.
What are the hidden charges I should watch out for?
When Buying: Registration charges and road tax (8-14%), insurance premiums (₹15,000-₹50,000 annually), loan processing fees (1-2%), prepayment charges, extended warranty costs, and increasing maintenance costs. When Leasing: Security deposit (refundable), down payment, excess mileage charges (₹8-15/km over limit), wear and tear penalties, early termination fees, and disposition/return charges. Always read the fine print on mileage limits and condition requirements.
How is car depreciation calculated in India?
Car depreciation in India typically ranges from 15-20% annually, highest in the first year. Typical schedule: Year 1: 15-20%, Year 2: 12-15%, Year 3: 10-12%, Year 4-5: 8-10%, Year 6+: 5-8%. Premium brands and well-maintained vehicles may retain value better. Electric vehicles currently face higher depreciation due to rapid battery technology advancements.
Can I buy the car at the end of the lease period?
Yes, most car leasing companies in India offer a buyback option at lease end, structured as either: (1) Predetermined Residual Value - buyback price fixed upfront based on estimated depreciation, or (2) Market Value - purchase at current market value. However, buying after lease may cost more overall than purchasing initially.
What is the minimum and maximum lease period for cars in India?
Car lease periods in India typically range from 2 to 5 years. Short-term leases: 12-24 months (less common, higher monthly payments), Standard leases: 36 months (most popular for personal use), Long-term leases: 48-60 months (better for business use, lower monthly payments). 3-year leases offer the best balance between monthly payments and avoiding excessive wear charges.