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Lease Vs Buy A Car

Before comparing potential you must first decide whether to lease or buy your next vehicle. Use this calculator to find out which is best for you and calculate potential savings. Simply enter information on the purchase price and vehicle down payment to calculate the expected monthly payments and total net price.

Calculate your potential savings

A big decision is whether to buy or lease a car. This tool will calculate the monthly payments and the total net cost. By comparing these amounts and between the two, you can determine which option is better for you.

How to calculate potential savings 

To effectively calculate if buying or leasing your next vehicle is right for you start by entering the vehicle information. This is the purchase price, vehicle down payment along with expected sales tax rate. After the calculator has gathered those starting numbers compare the net price for buying or leasing the vehicle. Then enter the expected term and interest rates for both. The net price of buying is calculated by adding the upfront costs - down payment, all fees and taxes - lost interest and the market value of the vehicle. Compare this number with the net price of the lease which is the combination of the upfront costs, lease payments and lost interest for the lease. Take a look at these two numbers visualized on the graph to determine which option is less expensive.

Buying and leasing definitions

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

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

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 on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.

Annual interest rate for your lease.

Term in months for your auto lease.

Annual interest rate for your loan.

The term in months for your auto loan. Typically this is 36, 48, 60 or 72 months. If your loan term is longer than your lease term, we compare the buy versus lease options to the time the lease expires, and then use your remaining loan term to calculate your outstanding loan balance.

Value of your auto after the lease term is over.

This is the total cost of leasing your vehicle. This is calculated as: Total upfront costs (capital reduction + other fees) + Total lease payments + Lost interest on lease = Net price of lease The lost interest on your lease 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.

This is the total cost of buying your vehicle. This is calculated as: Total upfront costs (down payment + other fees) + Lost interest + Outstanding loan balance at time lease expires - Market value of vehicle at time lease expires = Net price of buying

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

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

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

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.

Refundable security deposit required at time of lease. We assume that the security deposit is fully refunded at the time the lease ends.

Is it better to lease or buy a car