Use this calculator to find out how much buying a car and leasing a car will actually cost, and which is truly the better value. You can compare both the cost of monthly payments, and the total cost. Leasing vs. buying can be a complicated financial decision because of all the little cost factors. The calculator takes account of most of those factors for you. Such factors include: the residual value of the car vs. depreciation, leasing fees, down payments, auto loan interest, sales tax, lease term, and security deposit.
Purchase Price: the advertised purchase price of the automobile, taking into account any discounts or rebates.
Down Payment: Enter the down payment as a whole dollar amount. When selling a car, dealers traditionally ask for a down payment, though "no-money-down" offers are common, too.
Sales Tax Rate: Enter the state sales tax as a percentage. Sales tax can add a lot to the cost of buying a car. For a $20,000 car, a 5% sales tax would be $1,000.
Rate of Return: Enter what you would expect to get in interest if you placed the money in an investment account instead of placing it in a security deposit. Currently, the rates of return for CDs, money markets, and other relatively low-risk investment accounts are quite low, often under 2%. Mutual funds offer a higher possible rate of return, but may also very likely lose money. Generally speaking the security deposit is so low that the lost investment value of the money is not that much.
Loan Term (months): Enter the number of months you will be making loan payments, also called the term. A common loan term is 60 months.
Interest Rate: Enter as a percentage the interest rate of the auto loan.
Upfront Fees: Enter the total dollar amount of all fees you have to pay at the time you buy the car or take out the lease.
Annual Depreciation: Enter the percentage the car is expected to lose value by each year. Of course, if you knew this figure with absolute certainty, the decision would be much easier. The idea is to make an educated guess; you can try searching the web on your car's make and model names along with the term "annual depreciation" to find out what other people are saying about the car's expected annual depreciation.
Lease Term (months): Enter the total number of months you will be leasing the car (term). Usually the term is either 24 or 36 months.
Interest Rate: Enter as a percentage the interest rate of the auto lease.
Upfront Fees: Enter the total dollar amount of all fees you have to pay at the time you buy the car or take out the lease. Some leases do not charge anything upfront.
Residual Value: This is what the dealer or lease company says the car will be worth at the end of the lease term. The higher the residual value, the less you have to pay for the lease--but the more you'll have to pay if for some reason you decide to buy the car at lease end.
Security Deposit: Enter the whole dollar amount of the security deposit. Assuming you get the security deposit back at the end of the lease, this isn't really a cost, but it is money you will have to come up with before driving off. There is some risk, however, to the security deposit if you are not meticulous in keeping receipts of every instance of scheduled maintenance: more than one unscrupulous dealer has pulled out the magnifying glass to find excuses for not returning the security deposit.