How to Calculate Equilibrium Interest Rate Formula
by
Car Lease vs. Buy Calculator
Financing (Buy)
Leasing
(Used for 'Buy' comparison at end of lease)
Buying Total Cost
Leasing Total Cost
function calculateComparison() {
// Buy Inputs
var bPrice = parseFloat(document.getElementById('buy_price').value) || 0;
var bDown = parseFloat(document.getElementById('buy_down').value) || 0;
var bRate = (parseFloat(document.getElementById('buy_rate').value) || 0) / 100 / 12;
var bTerm = parseInt(document.getElementById('buy_term').value) || 0;
// Lease Inputs
var lMonthly = parseFloat(document.getElementById('lease_monthly').value) || 0;
var lDown = parseFloat(document.getElementById('lease_down').value) || 0;
var lTerm = parseInt(document.getElementById('lease_term').value) || 0;
var resale = parseFloat(document.getElementById('resale_value').value) || 0;
// Calculate Buy Monthly Payment (Standard Loan Formula)
var loanAmount = bPrice – bDown;
var bMonthly = 0;
if (bRate > 0) {
bMonthly = (loanAmount * bRate * Math.pow(1 + bRate, bTerm)) / (Math.pow(1 + bRate, bTerm) – 1);
} else {
bMonthly = loanAmount / bTerm;
}
// To make a fair comparison, we look at the cost over the LEASE TERM duration
// Total cost of buying for lTerm months = (Monthly * lTerm) + Down – Resale Value
// This assumes the owner sells the car at the same point the lease ends.
var totalBuyCost = (bMonthly * lTerm) + bDown – resale;
// Total cost of leasing = (Monthly * lTerm) + Due at signing
var totalLeaseCost = (lMonthly * lTerm) + lDown;
// Display results
document.getElementById('results').style.display = 'block';
document.getElementById('buy_total_result').innerHTML = '$' + totalBuyCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('buy_monthly_result').innerHTML = 'Monthly Loan: $' + bMonthly.toFixed(2);
document.getElementById('lease_total_result').innerHTML = '$' + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('lease_period_result').innerHTML = 'Over ' + lTerm + ' months';
var recDiv = document.getElementById('recommendation');
if (totalBuyCost < totalLeaseCost) {
var diff = totalLeaseCost – totalBuyCost;
recDiv.style.backgroundColor = '#c6f6d5';
recDiv.style.color = '#22543d';
recDiv.textContent = 'Buying is more cost-effective! You save approximately $' + diff.toLocaleString() + ' over ' + lTerm + ' months.';
} else {
var diff = totalBuyCost – totalLeaseCost;
recDiv.style.backgroundColor = '#bee3f8';
recDiv.style.color = '#2a4365';
recDiv.textContent = 'Leasing is more cost-effective! You save approximately $' + diff.toLocaleString() + ' over ' + lTerm + ' months.';
}
}
Should You Lease or Buy Your Next Car?
Deciding whether to lease or buy a car is one of the most significant financial decisions for many households. While buying a vehicle traditionally represents a long-term investment in ownership, leasing offers lower monthly payments and the opportunity to drive a new car every few years.
Understanding the Comparison
To compare lease vs. buy accurately, you must look at the Net Cost over the same period. This calculator evaluates the total out-of-pocket expense for both options, factoring in the equity (resale value) you would have if you chose to buy and then sell the vehicle at the end of the lease term.
Pros and Cons of Buying
Pros: No mileage limits, you build equity, and eventually, the monthly payments stop.
Cons: Higher monthly payments, higher down payment usually required, and you bear the full cost of depreciation.
Pros and Cons of Leasing
Pros: Lower monthly payments, lower maintenance costs (covered by warranty), and you can upgrade to a new model frequently.
Cons: Strict mileage limits, no ownership equity, and potential "wear and tear" fees at the end of the term.
Realistic Example
Let's say you are looking at a $35,000 SUV:
Buy Scenario: $5,000 down, 5% interest for 60 months. Your payment is ~$566. After 3 years, you've paid $20,376 in payments + $5,000 down. If the car is worth $21,000 (resale), your net cost for those 3 years is $4,376.
Lease Scenario: $3,000 at signing and $400/month for 36 months. Total cost: $17,400.
In this specific example, buying and eventually selling the car would result in a lower net cost, provided the vehicle retains its resale value.
Frequently Asked Questions
What is a "Money Factor"?
The money factor is the interest rate on a lease. To convert it to a standard APR, multiply the money factor by 2400.
Is it better to lease if I drive a lot?
Usually, no. Leases have strict mileage caps (typically 10,000 to 15,000 miles per year). If you exceed these, you may be charged $0.15 to $0.30 per extra mile, which adds up quickly.
What is residual value?
The residual value is the estimated value of the car at the end of the lease. A higher residual value usually results in lower monthly lease payments because you are financing a smaller portion of the car's depreciation.