Buy vs Lease vs Finance Calculator
How It Works
This buy vs lease vs finance calculator uses established formulas to provide accurate results.
The basic rule:
- Cash Net Cost = Vehicle Price + Insurance + Maintenance - Residual Value + Opportunity Cost (5%/yr)
- Finance Net Cost = Total Payments (principal + interest) + Insurance + Maintenance - Residual Value
- Lease Net Cost = (Monthly Payment x Months + Down Payment + Disposition Fee) x Number of Leases + Insurance
- Finance Payment = Loan * [r(1+r)^n] / [(1+r)^n - 1]
Results are estimates. Consult a professional for critical decisions.
Frequently Asked Questions
How does this compare cash buying to financing?
Cash buying avoids interest charges but ties up capital that could earn investment returns. The calculator includes a 5% annual opportunity cost on the cash purchase price. Financing spreads payments over time but adds interest costs. Both options leave you with a vehicle you own and can sell.
What lease costs are included?
The lease calculation includes monthly payments, a $2,000 down payment per lease, and a $350 disposition fee at the end of each lease term. If your ownership period exceeds 3 years, the calculator assumes you start a new lease. Insurance is 10% higher for leased vehicles as required by most lessors.
Why might leasing still be a good option?
Despite often having the highest total cost, leasing offers lower monthly payments, always driving a new car under warranty (minimal maintenance), no resale hassle, and potential tax benefits for business use. If you value having a new car every 3 years, the premium may be worth it.
How is depreciation calculated?
The calculator uses industry-standard depreciation rates: 20% in year 1, 15% in year 2, then gradually declining. After 5 years, a typical vehicle retains about 34% of its original value. Luxury vehicles and trucks may retain value differently.