Deciding whether to buy or lease a car is a significant financial decision. Each option has its own advantages and disadvantages, impacting your overall cost of ownership, flexibility, and long-term financial goals. This calculator helps you compare the estimated costs of purchasing a vehicle versus leasing one over a defined period, allowing for a more informed choice.
Car Purchase Explained
When you purchase a car, you are buying it outright, either with cash or through a loan. Over time, you build equity in the vehicle. After paying off your loan, you own the car free and clear and can keep it for as long as you wish, sell it, or trade it in.
Pros: Full ownership, no mileage restrictions, can customize the vehicle, builds equity, can be kept indefinitely.
Cons: Higher monthly payments (if financed), responsible for all maintenance and repairs after warranty, potential for depreciation loss.
The Purchase Calculation:
Loan Amount: (Vehicle Price + Taxes & Fees) – Down Payment – Trade-in Value
Total Loan Payments: Calculated using a standard loan amortization formula for the loan amount, interest rate, and term.
Total Cost of Purchase: Total Loan Payments + Down Payment – (Resale Value after Loan Term – Estimated Value of Trade-in if not used as down payment)
*Note: This simplified model estimates resale value; actual market value may vary. It also assumes the trade-in value is applied directly to the purchase price.
Car Leasing Explained
Leasing a car is essentially a long-term rental agreement. You pay to use the vehicle for a fixed period, typically between 2-4 years, and are subject to mileage limits and restrictions on modifications. At the end of the lease term, you return the car to the dealership, usually with the option to purchase it at its predetermined residual value.
Pros: Lower monthly payments compared to financing a purchase, often get a new car every few years, warranty coverage typically lasts the entire lease term, less concern about depreciation.
Cons: No ownership, strict mileage limits (with penalties for exceeding them), restrictions on modifications, early termination fees can be substantial, can be more expensive long-term if you plan to keep cars for many years.
The Lease Calculation:
Depreciable Amount: Vehicle Purchase Price – Residual Value
Depreciation Cost over Lease Term: (Depreciable Amount) * (Lease Term in Months / Total Months in Vehicle's Life Cycle – often estimated or based on typical ownership before major repairs)
Finance Charge (Rent Charge): Calculated based on the average lease balance and the money factor (which is related to the annual interest rate). Simplified here as: (Vehicle Purchase Price + Residual Value) * Money Factor * Lease Term (in months)
Monthly Lease Payment (Before Taxes & Fees): (Depreciation Cost over Lease Term + Finance Charge) / Lease Term (in months)
Total Lease Cost: (Monthly Lease Payment * Lease Term in Months) + Due at Signing + Estimated Overage Mileage Charges (if applicable)
*Note: This calculator uses a simplified approach. Actual lease payments involve complex calculations and dealer fees. Taxes and fees are often applied to the monthly payment in many states. The residual value is a percentage of the original MSRP.
Key Factors to Consider:
Driving Habits: Do you drive a lot of miles annually? If so, leasing might incur significant overage charges.
Desire for New Cars: Do you enjoy driving a new car every few years? Leasing is ideal for this.
Customization: Do you like to modify your car? Purchasing gives you this freedom.
Long-Term Ownership: Do you plan to keep your car for many years? Purchasing is typically more cost-effective in the long run.
Budget: Leasing generally offers lower upfront and monthly costs, making it more budget-friendly in the short term.
Use this calculator as a guide to estimate the financial implications of each choice based on your specific inputs. Remember to consult with dealerships for precise figures and consider all associated costs like insurance, maintenance, and potential fees.
function calculateCarFinancing() {
var vehiclePrice = parseFloat(document.getElementById("vehiclePrice").value);
var downPaymentPurchase = parseFloat(document.getElementById("downPaymentPurchase").value);
var loanTermPurchase = parseInt(document.getElementById("loanTermPurchase").value);
var annualInterestRatePurchase = parseFloat(document.getElementById("annualInterestRatePurchase").value);
var tradeInValue = parseFloat(document.getElementById("tradeInValue").value);
var resaleValuePurchase = parseFloat(document.getElementById("resaleValuePurchase").value);
var downPaymentLease = parseFloat(document.getElementById("downPaymentLease").value);
var leaseTerm = parseInt(document.getElementById("leaseTerm").value);
var monthlyMileageAllowance = parseInt(document.getElementById("monthlyMileageAllowance").value);
var mileageOverageCharge = parseFloat(document.getElementById("mileageOverageCharge").value);
var residualValuePercentage = parseFloat(document.getElementById("residualValuePercentage").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(vehiclePrice) || vehiclePrice <= 0 ||
isNaN(downPaymentPurchase) || downPaymentPurchase < 0 ||
isNaN(loanTermPurchase) || loanTermPurchase <= 0 ||
isNaN(annualInterestRatePurchase) || annualInterestRatePurchase < 0 ||
isNaN(tradeInValue) || tradeInValue < 0 ||
isNaN(resaleValuePurchase) || resaleValuePurchase < 0 ||
isNaN(downPaymentLease) || downPaymentLease < 0 ||
isNaN(leaseTerm) || leaseTerm <= 0 ||
isNaN(monthlyMileageAllowance) || monthlyMileageAllowance <= 0 ||
isNaN(mileageOverageCharge) || mileageOverageCharge < 0 ||
isNaN(residualValuePercentage) || residualValuePercentage 100) {
resultDiv.innerHTML = 'Please enter valid positive numbers for all fields.';
return;
}
// — Purchase Calculation —
var loanAmountPurchase = vehiclePrice – downPaymentPurchase – tradeInValue;
if (loanAmountPurchase 0 && monthlyInterestRatePurchase > 0) {
monthlyPaymentPurchase = loanAmountPurchase * (monthlyInterestRatePurchase * Math.pow(1 + monthlyInterestRatePurchase, numberOfPaymentsPurchase)) / (Math.pow(1 + monthlyInterestRatePurchase, numberOfPaymentsPurchase) – 1);
totalLoanPaymentsPurchase = monthlyPaymentPurchase * numberOfPaymentsPurchase;
} else {
totalLoanPaymentsPurchase = loanAmountPurchase; // If no interest or loan amount is 0, payment is just the principal
}
var totalCostOfPurchase = totalLoanPaymentsPurchase + downPaymentPurchase;
var netCostOfPurchase = totalCostOfPurchase – resaleValuePurchase; // Assuming resale is realized at end of loan term
// — Lease Calculation —
var residualValue = vehiclePrice * (residualValuePercentage / 100);
var depreciationAmount = vehiclePrice – residualValue;
var depreciationCostPerMonth = depreciationAmount / (leaseTerm * 12);
// Simplified finance charge calculation (Money Factor is often used, but can be approximated from APR)
// Approximate money factor: APR / 2400
var moneyFactor = (annualInterestRatePurchase / 100) / 2400; // Using purchase APR as a proxy
var averageLeaseBalance = (vehiclePrice + residualValue) / 2;
var financeChargeTotal = averageLeaseBalance * moneyFactor * (leaseTerm * 12);
var monthlyLeasePaymentPreTax = depreciationCostPerMonth + (financeChargeTotal / (leaseTerm * 12));
// In reality, taxes are often applied to the monthly payment itself.
// For simplicity, we'll add them at the end, assuming a hypothetical tax rate for comparison.
// However, for this calculator, we'll compare the core costs.
// Estimate mileage overage if applicable
var totalMilesDrivenLease = monthlyMileageAllowance * leaseTerm;
var mileageOverageCost = 0;
// We need an assumed mileage for the lease term to calculate overage.
// For a fair comparison, let's assume the purchase vehicle is driven the same total miles as the lease allowance.
// If purchase vehicle is driven less, this cost isn't directly comparable.
// For this calculator, we'll assume the lease is driven exactly the allowance, hence no overage for a clean comparison.
// A more complex calculator would allow user input for total miles driven for purchase comparison.
var totalLeaseCost = (monthlyLeasePaymentPreTax * leaseTerm * 12) + downPaymentLease + mileageOverageCost;
// — Display Results —
var html = '
';
// Overall Recommendation based on net cost over the period
if (netCostOfPurchase < totalLeaseCost) {
html += '
';
html += '
Recommendation:
';
html += 'Based on your inputs, purchasing appears to be the more cost-effective option over the specified periods.';
html += '
';
} else if (totalLeaseCost < netCostOfPurchase) {
html += '
';
html += '
Recommendation:
';
html += 'Based on your inputs, leasing appears to be the more cost-effective option over the specified periods, primarily due to lower monthly payments and upfront costs.';
html += '
';
} else {
html += '
';
html += '
Recommendation:
';
html += 'The estimated costs for purchasing and leasing are very similar based on your inputs. Consider other factors like desired flexibility, long-term ownership plans, and tolerance for mileage limits.';
html += '