Should you lease or buy your car? Use this calculator to find
out! We calculate your monthly payments and your total net cost. By
comparing these amounts, you can determine which is the better
value for you.
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 2007, the
average compounded rate of return for the S&P 500, including
reinvestment of dividends, was approximately 11.4% per year
(source: www.standardandpoors.com). During this period, the highest
12-month return was 61%, and the lowest was -39%. Savings accounts
at a bank may pay as little as 1% or less.
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.
Information and interactive calculators are made
available to you as self-help tools for your independent use and
are not intended to provide investment advice. We can not and do
not guarantee their applicability or accuracy in regards to your
individual circumstances. All examples are hypothetical and are for
illustrative purposes. We encourage you to seek personalized advice
from qualified professionals regarding all personal finance
issues.
