Deciding whether to lease or buy a car is one of the most significant financial decisions for many households. While buying a car eventually leads to ownership and equity, leasing often provides lower monthly payments and the ability to drive a newer vehicle every few years.
How the Calculation Works
To provide an accurate comparison, our calculator evaluates several key metrics:
Depreciation: The biggest cost of car ownership. In a lease, you only pay for the depreciation that occurs during your term.
Money Factor: This is essentially the interest rate for a lease. To find the equivalent APR, multiply the money factor by 2400.
Residual Value: This is what the car is expected to be worth at the end of the lease. A higher residual value typically means lower lease payments.
Realistic Examples
Consider a $40,000 SUV. If you buy it with a $5,000 down payment at 6% interest for 60 months, your payment would be roughly $676/month. After 5 years, you own the car entirely.
If you lease the same vehicle for 36 months with a residual value of $22,000 and a money factor of 0.003, your payment might drop to $550/month. However, at the end of the term, you must return the car or buy it for the residual amount.
Which Option Should You Choose?
Choose Buying if: You plan to keep the car for more than 5 years, drive more than 15,000 miles per year, or want to customize the vehicle.
Choose Leasing if: You prefer a new car every 3 years, want lower monthly payments to maintain cash flow, and drive a predictable number of miles.
function calculateLeaseVsBuy() {
var carPrice = parseFloat(document.getElementById('carPrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var residualValue = parseFloat(document.getElementById('residualValue').value);
var moneyFactor = parseFloat(document.getElementById('leaseRate').value);
if (isNaN(carPrice) || isNaN(downPayment) || isNaN(loanTerm)) {
alert("Please enter valid numerical values.");
return;
}
// Loan Calculation
var principal = carPrice – downPayment;
var monthlyInt = (interestRate / 100) / 12;
var loanPayment = 0;
if (monthlyInt > 0) {
loanPayment = principal * (monthlyInt * Math.pow(1 + monthlyInt, loanTerm)) / (Math.pow(1 + monthlyInt, loanTerm) – 1);
} else {
loanPayment = principal / loanTerm;
}
var totalLoanOutofPocket = (loanPayment * loanTerm) + downPayment;
// Lease Calculation (assuming standard 36 month lease for comparison or using loanTerm)
var leaseTerm = 36; // Industry standard for comparison
var depreciationFee = (carPrice – downPayment – residualValue) / leaseTerm;
var financeFee = (carPrice – downPayment + residualValue) * moneyFactor;
var leasePayment = depreciationFee + financeFee;
var totalLeaseOutofPocket = (leasePayment * leaseTerm) + downPayment;
// Display results
document.getElementById('monthlyLoan').innerText = "$" + loanPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalBuyCost').innerText = "$" + totalLoanOutofPocket.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlyLease').innerText = "$" + (leasePayment > 0 ? leasePayment : 0).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalLeaseCost').innerText = "$" + (totalLeaseOutofPocket > 0 ? totalLeaseOutofPocket : 0).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var diff = Math.abs(loanPayment – leasePayment);
var recommendation = "";
if (leasePayment < loanPayment) {
recommendation = "Leasing saves you approximately $" + diff.toFixed(2) + " per month in cash flow compared to buying.";
} else {
recommendation = "In this scenario, buying has a similar or lower monthly impact than leasing.";
}
document.getElementById('comparisonText').innerText = recommendation + " Note: Buying builds equity while leasing does not.";
document.getElementById('resultsArea').style.display = 'grid';
}