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Lease Vs. Buy A Car

Before comparing potential loan rates you must first decide whether to lease or buy your next vehicle. Use this calculator to find out which is best for you and calculate potential savings. Simply enter information on the purchase price and vehicle down payment to calculate the expected monthly payments and total net price.  

Calculate your potential savings

A big decision is whether to buy or lease a car. This tool will calculate the monthly payments and the total net cost. By comparing these amounts and researching other differences between the two, you can determine which option is better for you.


Total purchase price. Price should be after any manufacturer's rebate.
Amount paid as a down payment, which for leases is often called a capital reduction.
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 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 types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2016, had an annual compounded rate of return of 6.6%, including reinvestment of dividends. From January 1, 1970 to December 31st2016, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.3% (source: 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 financial institution may pay as little as 0.25% 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 Separate Account investment funds and/or investment companies may charge.

Term in months for your auto loan. Typically this is 36, 48, 60 or 72 months. If your loan term is longer than your lease term, we compare the buy vs lease options to the time the lease expires, and then use your remaining loan term to calculate your outstanding loan balance.
Annual interest rate for your loan.
Any fee, other than a capital reduction or down payment, required to be paid at the time of purchase. This may include license, title transfer fees, etc.
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.
Value of your auto after the lease term is over.
This is the total cost of buying your vehicle. This is calculated as: 
  1. + Total up front costs (down payment + other fees)
  2. + Lost interest
  3. + Outstanding loan balance at time lease expires
  4. - Market value of vehicle at time lease expires
  5. = Net cost of buying

The lost interest on your purchase 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.

Term in months for your auto lease.
Annual interest rate for your lease.
Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease. This may include license, title transfer fees, etc.
For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.
Refundable security deposit required at time of lease. We assume that the security deposit is fully refunded at the time the lease ends.
This is the total cost of leasing your vehicle. This is calculated as: 
  1. + Total up front costs (capital reduction + other fees)
  2. + Total lease payments
  3. + Lost interest on lease
  4. = Net cost of lease

The lost interest on your lease 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 'Net cost of buying' for an explanation on how we account for any interest you might earn by having a lower monthly lease payment.

How to calculate potential savings 

To effectively calculate if buying or leasing your next vehicle is right for you start by entering the vehicle information. This is the purchase price, vehicle down payment along with expected sales tax rate. After the calculator has gathered those starting numbers compare the net price for buying or leasing the vehicle. Then enter the expected term and interest rates for both.

The net price of buying is calculated by adding the upfront costs — down payment, all fees and taxes — lost interest and the market value of the vehicle. Compare this number with the net price of the lease which is the combination of the upfront costs, lease payments and lost interest for the lease. 

Take a look at these two numbers visualized on the graph to determine which option is less expensive.


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 that you are willing to spend. There is no golden rule when it comes to deciding which is best but rather takes some reflection on your driving habits and budget. 

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. Buying 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.