Deciding between leasing and buying a car is more than just a monthly payment calculation. It involves understanding depreciation, equity, and your long-term driving habits. This calculator compares the immediate monthly costs and total interest/fees associated with both paths.
How Buying Works
When you buy a car with a loan, your monthly payments go toward owning the asset entirely. Once the loan is paid off, you own the car's remaining value (equity). While the monthly payments are usually higher, you save money in the long run by not having perpetual car payments.
How Leasing Works
Leasing is essentially renting a car for a fixed period, usually 36 months. You only pay for the car's depreciation during that time, plus a "money factor" (interest). This results in lower monthly payments, allowing you to drive a more expensive car for less money upfront, but you leave with zero equity at the end of the term.
Key Terms to Know
Residual Value: The estimated value of the car at the end of the lease. High residual values lead to lower lease payments.
Money Factor: The interest rate on a lease. Multiply this by 2400 to get the equivalent APR (e.g., 0.0025 * 2400 = 6% APR).
Equity: The market value of the car minus what you owe. In a lease, the dealership keeps the equity.
Example Calculation
Imagine a $40,000 SUV with a 60-month loan at 5%. Your payment would be roughly $660/month. If you leased that same car for 36 months with a 60% residual and a 0.0025 money factor, your payment might drop to $540/month. However, after 5 years of buying, you own a car worth $18,000. After 5 years of leasing (two consecutive leases), you own nothing.
function calculateLeaseVsBuy() {
var price = parseFloat(document.getElementById('vehiclePrice').value);
var down = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('interestRate').value) / 100 / 12;
var term = parseFloat(document.getElementById('loanTerm').value);
var residualPct = parseFloat(document.getElementById('residualValue').value) / 100;
var mf = parseFloat(document.getElementById('moneyFactor').value);
if (isNaN(price) || isNaN(down) || isNaN(rate) || isNaN(term)) {
alert("Please enter valid numerical values.");
return;
}
// Buying Calculation (Amortization)
var principal = price – down;
var buyMonthly = (principal * rate * Math.pow(1 + rate, term)) / (Math.pow(1 + rate, term) – 1);
var totalPaid = buyMonthly * term;
var totalInterest = totalPaid – principal;
// Leasing Calculation (Standard 36 Month Lease Comparison)
// Formula: (Cap Cost – Residual) / Term + (Cap Cost + Residual) * Money Factor
var leaseTerm = 36;
var capCost = price – down;
var resVal = price * residualPct;
var monthlyDepreciation = (capCost – resVal) / leaseTerm;
var monthlyRent = (capCost + resVal) * mf;
var leaseMonthly = monthlyDepreciation + monthlyRent;
var leaseTotal = leaseMonthly * leaseTerm;
// Display Results
document.getElementById('results').style.display = 'block';
document.getElementById('buyMonthly').innerText = '$' + buyMonthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('buyInterest').innerText = '$' + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('leaseMonthly').innerText = '$' + leaseMonthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('leaseTotal').innerText = '$' + leaseTotal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var recommendation = document.getElementById('recommendation');
if (leaseMonthly < buyMonthly) {
var diff = buyMonthly – leaseMonthly;
recommendation.innerHTML = "Analysis: Leasing saves you $" + diff.toFixed(2) + " per month in cash flow. However, buying builds equity. After " + term + " months, you will own an asset worth approximately $" + (price * 0.4).toFixed(0) + " (estimated).";
} else {
recommendation.innerHTML = "Analysis: Interestingly, the lease is not providing a cash flow benefit here. Buying is likely the significantly better financial choice in this scenario.";
}
}