Should I lease or purchase an auto?

Leasing has become a very popular method of acquiring a new auto. Although the payments may seem attractive, it may not always be the best financial decision versus purchasing the vehicle outright and financing it with a low interest loan. Use the following calculator to help analyze the financial impact of lease versus buy.

Enter your values and select Calculate.

The two totals above, total lease cost and total purchase cost, put leasing and buying on the same footing over the same term, so you can compare them directly. The purchase total already nets out the vehicle's residual value at the end of the loan, and the lease total already includes the deposit, so neither figure needs further adjustment before you compare them.

The inputs that move these totals the most are the monthly lease payment, the loan rate, and the residual value you expect the car to hold. A small change in any of these can flip which option looks cheaper, so if the two totals are close, it is worth going back and testing a slightly higher or lower loan rate or a more conservative residual value.

Neither total includes insurance, maintenance, mileage penalties, or how the tax treatment of a lease payment versus loan interest might differ where you live. It also assumes you keep the vehicle for the full term; trading in early or extending a lease changes the math in ways this calculator does not model.

If the gap between buying and leasing is narrow, it is worth rerunning this with the actual numbers from a dealer quote rather than estimates, and bringing the result to a lender or advisor before signing. Revisit the comparison whenever the loan rate offered to you changes or the lease deal is updated, since either one alone can shift the answer.

This information may help you analyze your financial needs. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy. Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results.