Lease vs Buy Calculator
About the Lease vs Buy Calculator
This calculator helps you compare the financial implications of leasing versus buying a vehicle. By entering details about both options, you can see a side-by-side comparison of costs and make a more informed decision about which option better suits your needs.
How to Use This Calculator
- Enter Vehicle Details: Input the vehicle price and applicable sales tax rate.
- Lease Information: Enter the lease down payment, term length, and monthly payment amount.
- Purchase Information: Provide the purchase down payment, loan term, and interest rate.
- Compare Results: Review the detailed cost breakdown and visual comparison chart.
Understanding Lease vs Buy
Leasing Considerations
- Lower Monthly Payments: Leasing typically offers lower monthly payments than buying.
- Mileage Restrictions: Leases usually come with annual mileage limits.
- New Car More Often: Ability to drive a new car every few years.
- No Ownership Equity: Payments don't build any ownership in the vehicle.
Buying Considerations
- Build Equity: Each payment contributes to owning the vehicle outright.
- No Mileage Limits: Freedom to drive as much as you want.
- Customization: Freedom to modify or customize the vehicle.
- Long-term Value: Potential for better long-term financial value.
Factors to Consider
Usage Patterns
Consider your annual mileage, driving habits, and how long you typically keep a vehicle. High-mileage drivers might benefit more from buying.
Financial Goals
Think about your long-term financial objectives, including whether you want to build equity in a vehicle or prefer lower monthly payments.
Maintenance Costs
Leased vehicles are typically under warranty for the entire term, while purchased vehicles may require maintenance after the warranty expires.
Flexibility Needs
Consider how important it is to have the flexibility to modify your vehicle or end your commitment early.
Frequently Asked Questions
Which option is cheaper in the long run?
Generally, buying tends to be more cost-effective in the long term, especially if you keep the vehicle for many years after the loan is paid off. However, this depends on factors like maintenance costs, depreciation, and how long you keep the vehicle.
What happens at the end of a lease?
At lease end, you typically have the option to return the vehicle, buy it for a predetermined price, or lease a new vehicle. Each option has different financial implications that should be considered in your decision.
How does depreciation affect each option?
With a lease, depreciation is built into your monthly payments. When buying, you absorb the full depreciation cost, but this becomes less relevant if you plan to keep the vehicle for many years.
Can I negotiate lease terms?
Yes, many aspects of a lease are negotiable, including the purchase price (which affects monthly payments), money factor (interest rate), and sometimes the residual value. Understanding these terms helps you negotiate better.