Car Lease vs. Buy Calculator

Understanding the Lease vs. Buy Calculator

Deciding whether to lease or buy a car is a common financial dilemma. Leasing often comes with lower monthly payments, while buying leads to ownership. This calculator is designed to clarify the financial differences between the two options, helping you determine the total cost of each over a specified period.

How It Works

The calculator estimates the monthly payment and total cost for both a loan and a lease using your inputs.

• Buying: The calculation for buying a car is based on a standard auto loan. It uses the vehicle price, down payment, trade-in, sales tax, and loan APR to determine a fixed monthly payment using the amortization formula.
• Leasing: A lease payment is calculated differently. It is primarily based on the vehicle's depreciation during the lease term (the difference between its initial price and its projected 'residual value' at the end of the lease). The payment also includes a 'rent charge' or 'money factor' (similar to interest) and sales tax.

Comparing the Costs

The calculator presents the monthly payment for each option side-by-side, which is often the primary concern for budget-conscious shoppers. More importantly, it calculates the total cost over the term. For a lease, this is the sum of all payments plus the down payment. For a loan, it's the sum of all payments plus the down payment. While the monthly lease payment is almost always lower, comparing the total cost gives you a clearer picture of which option is more expensive over the specific term you've entered.

Frequently Asked Questions