Leasing isn’t wasted money, they scream! Why would you buy a depreciating asset? Your [sic] an idiot.
Buying a used car is the only logical choice, opponents reply. The only thing worse than buying a brand new car is to lease one. You have to be foolish and vain to even consider leasing! They nickel and dime you for every little thing. And god forbid you go over your yearly mileage! Or need to get out of your lease early! Then you’ll be paying out the nose. Is it really so important to you to have a new car every three years? Mindless consumerism! The real value will always be to buy used.
Our position in this debate has long been established, but we understand that different people value different things, and, for some, leasing may make more sense.
But for those who truly just want to know whether buying or leasing will be the best deal over the long term, we present our buy vs lease calculator. If you are considering a brand new car, the buy vs lease calculator will help you weigh the options.
Buying used vs leasing new
Since you cannot lease a used car, it’s more difficult to compare leasing new vs buying used. That said, you could enter the lease payment of a new vehicle and the purchase price of a used one in this calculator. If you do that, keep in mind that our calculations assume much larger off-the-lot depreciation when buying new—a large advantage of buying used is that depreciation rates tend to level off after the first year of ownership.
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How this calculator works
Its terms are pretty simple:
First, you fill out basic information about the car you’re buying. Enter your purchase price, the amount of cash you have available to pay, as well as the sales tax rate in your state.
The next step is to fill out the Buy Option and the Least Option.
In the Buy Option, you’ll select your loan term, the interest rate you’ll be paying and any additional fees you might pay.
In the Lease Option, you’ll fill out the same fields, plus the security deposit.
Finally, you’ll see both costs lined up in the Summary section.
How to read our results
The results will show you both the total cost to buy (or lease) over the next ten years. The buy option presumes you keep the same car for ten years; the lease options assumes that you lease a new car at the end of each leasing period. It also shows you the real monthly cost for both the buy and the lease option. We arrived at this figure by taking the total cost over ten years and dividing it by 120.
The calculator assumes equal wear and tear, registration fees, and fuel costs for both the buy and lease option. High mileage on a leased car will lead to overage fees, but high mileage on an owned car will cause further depreciation. Therefore, high mileage will affect both cars equally and for this reason is not considered in our calculations.
We assumed that you could otherwise earn 3% ROI with the money you’re spending on the car (quite a conservative estimate). We also assumed a 15% depreciation of your car per year, and a 60% residual percentage (the value of your vehicle after your lease ends).
Personal finance is personal, as we like to say around here. We can’t tell you whether you should buy or lease a car (though our commenters will be happy to!), but this calculator can give you an accurate understanding of the costs associated with each.
Whether you’re buying or leasing you will need car insurance, get a free quote below: