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Lease Vs. Purchase A Car
Before comparing potential you must first decide whether you would like to purchase or lease the next car. Make use of this calculator to find out which is best for you and estimate possible savings. Simply enter information on the purchase price and vehicle down payment to calculate anticipated monthly payments and the total net price.
Calculate your potential savings A important decision is to lease or purchase an automobile. This tool calculates the monthly payment and the net cost. When you compare these figures and between them alternatives, you can decide which one is best for you.


Definitions

PRICE OF BUY
Total purchase price. Price must be before any rebate from the manufacturer.


DOWN PAYMENT
Amount paid as a down payment. For leases is commonly referred to as a capital reduction.


SALES TX RATE
Percentage sales tax that will be imposed for this purchase. Sales tax is included in each lease payment. Sales tax for buying is added to the total purchase amount.


INVESTMENT RATE of RETURN
Return on investment. This is the rate of return you could earn if you were to invest your security deposit or down payment instead of putting it into your auto purchase or lease. The exact rate of return is dependent on the kind of investments you choose. The Standard & Poor's 500(r) (S&P 500(r)) for the 10 years ended December 31st, 2016 earned an annual compounded rate of return of 6.6 percent, which includes reinvestment of dividends. From January 1, 1970 to December 31 st 2016, the average annual compounded rate of return for the S&P 500(r), including reinvestment of dividends, was approximately 10.3% (source: www.standardandpoors.com). From 1970 to the present, the top annual return of 61% was recorded in the 12 months prior to it (June 1982 until June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts in a financial institution may pay as little as 0.25 percent or less, but have a significantly lower risk of loss of principal balances. It is important to remember that these scenarios are only hypothetical and that future rates of return cannot be forecast with absolute certainty. It is also important to remember the investments that offer more in return generally have higher risk and volatility. The actual rate of investment returns can fluctuate dramatically over time, and especially for long-term investments. This is due to the possibility of losing of principal invested in your investment. It is not possible to invest directly in an index. The compounded rate of return noted above is not inclusive of the sales costs and other fees that Separate Account investment funds and/or investment companies might charge.


LOAN TIME IN MONTHS
The length of time for your car loan. Typically this is 36 48, 60, 48 or 72 months. If you're loan term is longer than your lease term then we will examine the buy vs. lease options prior to when the lease ends, and then apply the remainder of your loan term to determine your remaining loan balance.


LEND INTEREST RATE
Annual interest rate applicable to your loan.


OTHER FEES
Any fee, other than an capital reduction or a down payment, must pay at moment of purchase. This can include license charges, title transfer fees etc.


ANNUAL DEPRECIATION
The depreciation rate is a measure of the speed at which your brand new vehicle will decrease in value. The highest rate of depreciation is approximately 20 percent per year, a medium is about 15 percent per year, and the lowest rate is 10% per year.


MARKET VALUE OF VEHICLE
Value of your auto when the lease term is past.


NET COST OF BUYING
The total amount is the price of purchasing your vehicle. This is calculated as the following: + Total upfront costs (down payment and other fees) + Lost interest + Outstanding loan balance at time lease expires. Market value of the vehicle when lease expires = Net cost of buying The lost interest on your purchase includes the interest you earned at the investment rate of return on the purchase option's down payment and other fees. If the monthly cost for leasing is lower than the monthly amount to purchase, this includes any interest lost because of the larger monthly payments. In the event that leasing becomes more costly than purchasing, your purchase's interest cost is decreased by the amount of the interest you earn from the difference.


Lease Term in Months
Term in months for your auto lease.


LEASE TERM IN MONTHS
Annual interest rate for lease.


Other FEES
Any other fee, besides a capital reduction or down payment, that is required to be paid at the close period of lease. This can include license fee, title transfer fees etc.


REIDUAL PERCENT
For leases, this represents the remaining amount after lease term expires. The more you pay, the lower your lease payments will be.


SECURITY DEPOSIT
A security deposit that can be refunded is required at the moment of leasing. We assume that security deposits will be fully refunded at the time the lease comes to an end.


NET COST OF LEASE
This is the total cost you pay for leasing your car. This is calculated as total up-front expenses (capital reduction + other fees) + total lease payments plus lost rent = net cost of leasing The loss of interest from the lease is the interest you earned at the rental rate of return leasing options' down payment and security and other charges. Please see the definition for "Net Cost of Buying" to learn more about how we calculate any interest you might earn from having a lower monthly lease payment.


How can you determine the savings potential To effectively calculate if purchasing or leasing your next vehicle is the best option for you, you must first enter the details of your vehicle. It is the price of purchase and down payment for the vehicle along with expected sales tax rate. Once the calculator has gathered those starting numbers determine the net cost of leasing or buying the vehicle. Enter the expected duration and interest rates for both. The net price of buying is calculated by adding upfront costs -- down payment, fees and taxes -- loss of interest, along with the fair market value for the car. Compare this number with the cost of the lease that is the sum of the upfront costs, lease payments and the loss of interest on the lease. Check out these two numbers visualized in the graph to decide which is the more cost-effective option.

Buying and leasing definitions
Annual depreciation Rate The rate of depreciation determines the speed at which your new automobile will lose its market value. The highest depreciation rate is 20% per annum. Medium is 15 percent per year and the lowest is 10 percent per year.


Down payment The amount that is paid as a down payment, that for leases is usually known as a capital reduction.


Return on investment Rate of return on investments. This is the return that you could earn if you were to invest your down payment , or security deposit instead of using it for the lease or purchase of your vehicle. The return rate on investments can vary widely over time, and this is especially true for investments that are long-term. This includes the potential loss of capital on your investment.


Interest rate on lease Annual interest rate on your lease.


The lease term is in months. of your auto lease.


Rate of interest on loan Annual interest rate for your loan.


Loan term in months The duration in months for your car loan. The typical term is 36 (or 48), 60 (or 72) months. If you're loan term is longer than your lease term and you want to compare buy and lease options with respect to the time the lease expires. We then we use the remaining loan period to determine your remaining loan balance.


Value of your vehicle in the market of your vehicle after lease period is up.


Net cost of leasing This is the total cost of leasing your car. This is calculated as the following: Total upfront cost (capital reduction + other fees) + Total lease payments + Lost interest on lease = Net price of lease The lost interest on your lease includes the interest you would have earned based on your investment rate of return on the lease option's initial payment, security deposit and other charges.


Net price of purchase This is the total cost of purchasing your vehicle. It is calculated using the following: Total upfront cost (down payment plus other costs) + Lost interest + outstanding loan balance when lease expires - market value of the vehicle at the time lease ends = Net cost of purchasing The lost cost of interest for your purchase also includes any interest you might have earned based on the investment rate for the buy option's initial down payment as well as other charges.



Other fees Any cost, other than a capital reduction or down payment, required to be paid in the time of purchase or close to the term of lease. This can include license fees, title transfer fees and other similar costs.


Purchase price Total price of purchase. Price must be before any rebate offered by the manufacturer.



Residual percentage for leases it's the value left when the lease expires. The higher this amount is, the less your lease payment will be.


Sales tax rate Tax rate Percentage sales tax to be charged on this purchase. The sales tax will be included into each lease payment. Sales tax for buying is imposed on the entire sale amount.



Security deposit Security deposit Refundable due at the date of the lease. We presume that the security deposit will be fully refunded by the time the lease expires.


Is it better to lease or purchase the car? The decision on the next car you purchase is based on the number of distance you plan to travel and the amount you're willing to invest. There is no golden guideline when it comes to deciding which is best but rather takes some reflection on your lifestyle and financial budget. a car tends to cost less on a monthly basis and gives you the opportunity to get behind the wheel of a more luxurious vehicle. However, it also means that you have to travel restrictions and over the limits of the vehicle. You are in complete control of the vehicle, which means you don't need to keep track of the number on the odometer. Or the costs for wear and tear on the vehicle.


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