A Car Loan vs Lease Calculator helps you compare the financial costs of buying a car with a loan versus leasing it. This calculator shows you side-by-side comparison of monthly payments, total costs, interest paid, and overall financial impact of each option. It's an essential tool for making an informed decision about your next car purchase.
When buying a car, you have two main financing options: take a loan and own the car, or lease the car for a fixed period. Both have different financial implications. A loan means higher monthly payments but you build equity and own the car. A lease means lower monthly payments but you never own the vehicle and must return it at the end of the lease term.
Our calculator provides a comprehensive comparison including loan EMI, total interest, lease payments, residual value, and helps you understand which option is more economical based on your specific situation.
EMI = [P × R × (1+R)^N] / [(1+R)^N - 1]
Where:
Total Interest = (EMI × N) - P
Total Cost = Down Payment + (EMI × N)
Car Price: ₹10,00,000
Down Payment: ₹2,00,000
Loan Amount: ₹8,00,000
Interest Rate: 9.5% per year
Tenure: 5 years (60 months)
Monthly EMI: ₹16,751
Total Interest: ₹2,05,060
Total Cost: ₹12,05,060
To make the right decision, compare the total cost of ownership over the same period:
Scenario: ₹10 lakh car
Verdict: Car loan saves ₹1,44,940 over 5 years AND you own the car!
Car loan means you're buying the vehicle and will own it after paying off the loan. Car lease is like renting - you pay monthly to use the car but return it at lease end. Loans have higher monthly payments but you own the asset. Leases have lower payments but you don't own the car.
It depends on your needs. Lease is better if you want lower monthly payments, new car every 2-3 years, and don't drive much. Loan is better if you want to own the car, drive more than 15,000 km/year, or keep the car long-term. Calculate total costs using our calculator to decide.
Leasing disadvantages: (1) You don't own the car, (2) Mileage restrictions with penalties, (3) No equity buildup, (4) Early termination fees, (5) Wear and tear charges, (6) Continuous monthly payments. After lease end, you have nothing to show for your payments.
Yes, most car leases have a buyout option. You can purchase the car at the residual value (predetermined value) at lease end. However, the total cost (lease payments + buyout) is usually higher than buying with a loan from the start.
In India (2026), good car loan interest rates range from 7.5% to 9.5% for new cars and 9% to 12% for used cars. Rates depend on your credit score, income, down payment, and lender. Banks typically offer lower rates than NBFCs.
Ideally, put 20-30% as down payment for a car loan. Higher down payment reduces loan amount, lowers EMI, decreases total interest paid, and improves loan approval chances. For a ₹10 lakh car, aim for ₹2-3 lakh down payment.
If you exceed the mileage limit (typically 10,000-15,000 km/year), you'll pay excess mileage charges at lease end. Charges are usually ₹5-10 per km over the limit. For 5,000 km excess, you could pay ₹25,000-50,000 penalty.
Yes, most banks allow car loan prepayment. Making lump sum prepayments or increasing EMI reduces loan tenure and saves interest. However, check for prepayment penalties (some banks charge 2-5% on prepaid amount within first 2 years).
Car leasing is relatively new and limited in India compared to USA/Europe. Some manufacturers like BMW, Mercedes, Audi offer leasing programs. However, most Indians prefer buying due to cultural preference for ownership and better resale value retention.
For business use, leasing may offer tax benefits as lease payments can be claimed as business expense. With loan, only interest portion is deductible. Consult a tax advisor to understand which option provides better tax benefits for your specific business situation.