Leasing vs. Buying a Car Calculator

Should you lease or buy a car? Use this leasing vs. buying a car calculator to find out. It will calculate your monthly payments and your total net cost. By comparing these amounts, you can find out which is the best value.

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Definitions

Term in months

Term in months for your auto lease or your auto loan.

Down payment

Amount paid as a down payment, which for leases is often called a capital reduction.

Other fees

Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease or loan. This may include license, title transfer fees, etc.

Purchase price

Total purchase price. Price should be after any manufacturer's rebate.

Interest rate

Annual interest rate for your loan or your lease.

Sales tax rate

Percentage sales tax to be charged on this purchase. Sales tax is included in each lease payment. Sales tax for buying is charged on the total sale amount.

Rate of depreciation

The rate of depreciation gauges how fast your new automobile will lose its market value. A high depreciation rate is about 20% per year, medium is 15% per year and low is 10% per year.

Residual percent

For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.

Market value of vehicle

Value of your auto after the lease term is over.

Investment rate of return

Rate of return on investments. This is the return that you would make if you were to invest your down payment or security deposit instead of using it in your auto purchase or lease.

The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Lost interest on buy option

This includes any interest you would have earned at your investment rate of return on the buy option's down payment and other fees. If the monthly payment for leasing is less than the monthly payment for buying, this also includes any lost interest due to the higher monthly payments. If leasing is more expensive than buying, your interest costs for buying are reduced by the amount of interest you would earn on the difference.

Lost interest on lease option

This includes any interest you would have earned at your investment rate of return on the lease option's down payment, security deposit and other fees. Please see the definition for "Lost interest on buy option" for an explanation on how we account for any interest you might earn by having a lower monthly lease payment.

Leasing vs. Buying a Car Calculator – Which Choice is Better Value for You?

Depending on an array of factors, some people may find leasing a better option than buying a car while others may prefer the latter. Our leasing vs. buying a car calculator will help you do the math in the most efficient manner so you could make an informed decision. Before you go ahead and sign the contract paper, make sure that you have thoroughly looked into all the important factors.

The main reasons people choose to lease is that it requires smaller monthly payments as compared to the amount you need to pay every month when you finance a purchase. But, it is important for you to understand that leasing includes some contractual obligations – something that most people don’t like to go for. Therefore, if your friend finds leasing a better option, it does not mean it is going to be the right thing for you also. You must take your decision based on your financial situation and other factors. The good news is that you don’t have to spend a lot of time doing your calculations. Use these leasing vs. buying a car calculator to decide what’s best for you and save time and money.

The calculator will also help you compare the monthly and annual costs associated with buying and leasing a car. By doing all the calculations at just a click of your mouse, you can determine which option is the best choice for you – leasing or buying a car? So, if you are looking for the best deal, you must utilize these fast leasing vs. buying a car calculator. It is easy to use, as all you have to do is just follow the simple steps as instructed.