Lease Vs. Buy A Car
Oct 05, 2023
Choosing whether to buy or lease a car is a big decision. After comparing potential loan rates, use this calculator to find out if leasing or buying is better for your finances. Simply enter a few basic pieces of information to calculate the expected monthly payments and total price for each. By comparing these amounts and researching other differences between buying and leasing, you can determine which option best fits your needs.
How to calculate potential savings
Here’s how to effectively calculate if buying or leasing your next vehicle is right for you:
- Enter the vehicle’s purchase price, down payment and expected sales tax rate. If you know it, you can also enter the investment rate of return.
- Enter the expected term, interest rates, other fees and estimated depreciation for buying and leasing.
- Under the lease option menu, enter your estimated residual and security deposit.
- Compare the monthly payments and total cost for buying or leasing the vehicle.
The net price of buying is calculated by adding the upfront costs — down payment and any relevant fees or taxes — lost interest and the market value of the vehicle. The net price of the lease includes upfront costs, lease payments and lost interest for the lease.
Buying and leasing definitions
Is it better to lease or buy a car?
The choice to lease or buy your next car comes down to the miles you intend to drive and the amount you are willing to spend. They both have benefits and drawbacks, and the final decision should come down to total cost, monthly cost and if you plan on driving the same car after your term is up.
Leasing a car tends to cost less on a monthly basis and offers you the chance to get behind the wheel of a nicer vehicle. But it does mean mileage restrictions and not holding full control over the vehicle — and there are some common mistakes that can cost you significant money you must avoid.
Buying a car puts you in total control of the vehicle, so you won’t have to worry about keeping track of the number on the odometer or additional charges for vehicle wear-and-tear. But it means a higher monthly payment and no guarantee that the car will be worth selling a few years down the line if you want an upgrade.