Should you lease or buy? Use this calculator to find out! We
calculate monthly payments and your total net cost. By comparing
these amounts, you can determine which is the better value for
you.
Definitions
Purchase price
Total purchase price.
Down payment
Amount paid as a down payment, which for leases is often called
a capital reduction.
Sales tax rate
Sales tax percentage to be charged on this purchase. Sales tax
is included in each lease payment. Sales tax for a purchase is
charged on the total sale amount.
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 purchase or lease.
The actual rate of return is largely dependent on the type of
investments you select. For example, from December 2000 to December
2010, the annual compounded rate of return for the S&P 500 was
0.899%, including reinvestment of dividends. From January 1970 to
December 2010, the average annual compounded rate of return for the
S&P 500, including reinvestment of dividends, was approximately
10.05% (source: www.standardandpoors.com). Since 1970, the highest
12-month return was 61% (June 1982 through June 1983). The lowest
12-month return was -43% (March 2008 to March 2009). 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 these scenarios are
hypothetical and 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.
Term in months
Term in months for your lease or your loan.
Other fees
Any fee, other than a capital reduction or down payment,
required to be paid at the close of the lease or loan.
Annual rate of depreciation
The rate of depreciation gauges how fast your new purchase 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.
Interest rate
Annual interest rate for your loan or your lease.
Residual percent
For leases, this is the remaining value after the lease term
expires. The higher this amount is, the lower your lease payment
will be.
Security deposit
Required deposit on leases. The security deposit is refunded to
you at the end of your lease (depending on excessive wear or
damage).
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 for buying. 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.