Auto Lease vs Loan Calculator Help

Should you lease your next car or buy it with a loan? The answer depends on how long you plan to drive the car, the resale value of the car you want, how often you want a new car, how much monthly payments will be, or how much it will cost each year to drive the car. Enter the lease and loan information into this calculator and let it show you all the important numbers you'll need to make the most informed decision.

Input Fields:

Title A title for these calculator results that will help you identify it if you have printed out several versions of the calculator.
Vehicle Name The name of the vehicle you want to lease or buy.
Leasing Company/Lender The name of your potential leasing company or lender. Dealerships usually have a leasing company or lender they automatically process leases or loans through. You do not have to use the dealership's leasing company or lender. You are free to shop around and find the best leasing company or lender for you. (Your bank or credit union, for instance, may offer lower interest rates or lease fees.) This field is not required but may help if you are comparing several leasing companies or lenders.
Vehicle MSRP The Manufacturer's Suggested Retail Price (not the price you hope to pay) for the vehicle you want to lease or buy. Click the link icon (), if available, to bring up a website and look up the MSRP. It's important to have an accurate MSRP when leasing because 'Residual Value' is based on MSRP, not the price you actually pay.
Negotiated Price The price you have negotiated (or hope to negotiate) for the vehicle you want to lease or buy. A good starting point for negotiating a vehicle price is to know the vehicle's invoice price, then offer something reasonable above that. Reasonable offers might be $300-$500 over invoice for vehicles with an MSRP up to $25,000, $500-$1,000 over invoice for vehicles up to $40,000 MSRP, and $2,000-$3,000 over invoice for vehicles over $40,000 MSRP. Use the link icon (), if available, to bring up a website and look up the invoice price (it may even show an average price that buyer's of this car are actually paying).

Lease: Also known as base capitalized (or cap) cost. Lease prices are negotiable just as new car prices are, and if your dealer or salesman tries to tell you price is not negotiable when leasing, find a new dealer! 'Negotiated Price' has the biggest influence when calculating your monthly payment.

Cost Reductions

Down Payment Any cash amount you plan to apply as a down payment to reduce your loan or lease amount.
Trade-In Value Any vehicle trade-in amount you plan to apply as a down payment to reduce your loan or lease amount.
Dealer Rebate Any dealer (or manufacturer) rebate or matching down payment amount you plan to apply as a down payment to reduce your loan or lease amount.
Other Reductions Any other amount that would become part of the down payment to reduce your lease or loan amount.
Total Cost Reductions Lease: Also known as capitalized cost (or cap cost) reduction.

Enter the total of any costs that will reduce the lease or loan amount, like down payment, trade-in value, and dealer rebate. Click the '+' icon for this section to expand the detail and let you enter values for individual reductions.

Financed Add-on Costs

Trade-In Loan Balance Any unpaid loan balance you still owe on the vehicle you intend to trade in.
Tags/Plates The cost to purchase or transfer tags or license plates for your new vehicle.
Title Fee The cost to have the title of your new vehicle transferred to its new owner (probably the leasing company or lender).
Registration Fee The fee charged by your state and/or county to have your new vehicle legally registered.
Lease Acquisition Fee Lease only: Sometimes called a bank fee. An administration fee (usually $250-$900) set and charged by the lease company, similar to points for a mortgage loan. High-end luxury vehicles have higher acquisition fees. It is becoming more common and is standard practice for some dealers to increase this fee themselves to increase their profit margin. If you don't see this fee mentioned in your lease contract ask about it specifically. If it's out of the normal range ($250-$900) it has probably been increased by the dealer and you may be able to negotiate it lower.
Insurance Costs This amount will normally be blank (or zero) since you probably will pay for auto insurance directly to the insurance company.

Lease: If your lease does not include gap protection or gap insurance, (most recent lease contracts do include this, but be sure to read the fine print), you should request it and enter that additional cost here. Gap protection covers any additional amount you may still owe, beyond what your insurance company pays, in the case of a totaled or stolen vehicle under lease. It is strongly recommended and very important for any leased vehicle to have gap protection coverage.
Extended Warranty If you have chosen coverage through an extended warranty, and that premium is to be financed into your lease or loan, enter the cost here.
Other Costs Any other amount (i.e. up-front sales tax or a luxury tax amount) that would become part of the financed costs, increasing your lease or loan amount.
Total Financed Add-on Costs Enter the total of any costs that will increase the lease or loan amount, like trade-in balance, tags/plates, title, registration, lease acquisition fee, insurance costs, and extended warranty. Click the '+' icon for this section to expand the detail and let you enter values for individual add-on costs.
Sales Tax % The percentage of sales tax your state charges on leased or purchased vehicles. Also, if your state has a maximum amount of sales tax on vehicles, enter that amount as the 'Maximum Sales Tax'.

Lease: Sometimes called usage tax. Sales tax on auto leases can get very complicated and varies from state to state. This calculator uses the most common method of calculating auto lease sales tax, which is to apply the sales tax percentage to the 'Monthly Depreciation Fee' + 'Monthly Lease Fee' and include sales tax in each monthly payment. Note: If your state charges sales tax up front on vehicle leases, include that amount in 'Financed Add-on Costs' and leave 'Sales Tax' percent and maximum blank.

Loan: The sales tax amount will be calculated from the percent or the maximum sales tax amount and will be added to 'Loan Amount'. If sales tax is not to be financed, enter it as a 'Cost Reduction' and enter zero here.
Sales Tax Maximum If your state has a maximum amount of sales tax on vehicles, enter that amount here.

Lease: If the 'Sales Tax' percentage goes over this 'Maximum' amount, the maximum sales tax will be divided by the number of lease payments and the resulting amount will be included in each monthly payment.

Loan: The 'Sales Tax' amount will either be the amount calculated from the sales tax percent or the 'Maximum' entered here.
Length of Lease/Loan Lease: Also known as lease term. How long you plan to keep the leased vehicle. Also choose whether 'Length of Lease' is years or months.

Loan: How long you will pay on this loan. Also choose whether 'Length of Loan' is years or months.
Money Factor Sometimes called lease factor. The money factor is the way interest is charged for leases. The money factor is expressed as a very small decimal number, like .00259. Don't confuse money factor with interest rate, as some dealers intentionally try to do. A money factor of .00259 is not an interest rate of 2.59%! However, money factor is directly related to the interest rate you will pay. In fact, you can estimate the interest rate by multiplying the money factor by 2400 (always use 2400 no matter what the 'Length of Lease' is). So a money factor of .00259 x 2400 = 6.21% as an approximate annual interest rate. If you don't know your lease's money factor, leave 'Money Factor' blank and enter 'New Car Interest Rate' instead and the money factor will be calculated for you or click the link icon (), if available, to bring up a website and look up the money factor for your car.
New Car Interest Rate Lease: If you don't know the money factor for your car, enter the current interest rates for new car purchases and 'Money Factor' will be estimated by dividing the interest rate by 2400. If the new car interest rate is 6.99%, divide that by 2400 = money factor of .00291.

Loan: The annual percentage rate you will pay for this loan.

You can look up current new car interest rates on the web. Click the link icon (), if available, to bring up a website and look up the current auto loan interest rates.
Sell After How long you plan to keep your vehicle. Also choose whether you'll sell after this many months or years.
Residual/Resale Value Lease: The wholesale value of a car at the end of the lease. Residual value is really what makes lease payments less than typical auto loan payments. The best cars to lease have a 24 month residual value of at least 50%. (Vehicle residual values vary greatly so make sure you look it up.) With a lease you essentially pay for the anticipated depreciation amount of the car over the 'Length of Lease' plus interest and sales tax, then you give the car back or pay 'Residual Value' and buy it. Residual values are often stated only as a percentage of MSRP. If you see your residual value stated as a percentage, leave 'Residual Value' blank and enter the percentage in the 'Percent of MSRP' field, then residual value will be calculated for you. If you need to look up the residual value or percentage, click the link icon (), if available, to bring up a website and look up the vehicle's residual value or percentage.

Loan: How much the car may be worth at 'Sell After' time. If you plan to sell within about 5 years, you can probably enter the residual value as if you were leasing. If your 'Sell After' time is longer than 5 years you can get a good estimate by finding used car values for the make and model (or similar), choosing a model year that makes it the same age as your 'Sell After' years. (For example, if my 'Sell After' time is 8 years and it's currently 2006, I'm going to look up the resale value for model year 1998.) If you need to look up used car values, click the link icon (), if available, to bring up a website and look up used car values.
Percent of MSRP Lease: The percent of MSRP the car is worth at the end of the lease. Residual values are often stated only as a percentage of MSRP, so if you know the percentage enter it here and 'Residual Value' will be calculated. You can look up residual values or percentages by clicking the 'Residual Value' link icon (), if available, to bring up a website and look up the vehicle's residual value or percentage.

Loan: The percent of MSRP the car may be worth at 'Sell After' time. If you plan to sell within about 5 years, you can probably enter the residual percentage as if you were leasing. If your 'Sell After' time is longer than 5 years you will need to have some other basis for estimating the resale percent, or enter a resale value instead.

Output Fields:

Total Cost Reductions Lease: Also known as capitalized cost (or cap cost) reduction.

Total of the above 'Cost Reductions'. Only include amounts that will reduce the lease or loan amount. Click the '-' icon for this section to collapse the detail and just enter a lump sum value for 'Total Cost Reductions'.
Total Financed Add-on Costs Total of the above 'Financed Add-on Costs'. Only include amounts that will increase the lease or loan amount, do not include amounts you will pay as part of up-front costs. Click the '-' icon for this section to collapse the detail and just enter a lump sum value for 'Total Financed Add-on Costs'.
Net Capitalized Cost/Loan Amount Lease: Your lease amount. The negotiated price minus cost reductions plus financed add-on costs gives the actual lease amount.

Loan: Your total auto loan amount once 'Sales Tax' and 'Total Financed Add-on Costs' are added and 'Total Cost Reductions' is subtracted.

Monthly Payment Lease: Your monthly lease payment, made up of the depreciation fee, lease fee, and sales tax.

Loan: Principal and interest to be paid each month.
Real Monthly Cost The real cost each month to lease or own your car is more than just the monthly payment amount. When deciding whether to lease or finance your next car, 'Real Monthly Cost' is far more important than 'Monthly Payment'. 'Real Monthly Cost' has calculated how much it actually costs each month (excluding gas and maintenance) by starting with your 'Total Payment' then adding back in your down payment, trade-in value, and subtracting out any 'Resale Value'. The final step is to divide this 'Actual Total Cost' by the number of months in your lease or the number of months you plan to keep the car ('Sell After' months).

Annual Payments Lease: Your monthly lease payment, made up of the depreciation fee, lease fee, and sales tax.

Loan: Principal and interest to be paid each month.
Real Annual Cost The real cost each month to lease or own your car is more than just the monthly payment amount. When deciding whether to lease or finance your next car, 'Real Monthly Cost' is far more important than 'Monthly Payment'. 'Real Monthly Cost' has calculated how much it actually costs each month (excluding gas and maintenance) by starting with your 'Total Payment' then adding back in your down payment, trade-in value, and subtracting out any 'Resale Value'. The final step is to divide this 'Actual Total Cost' by the number of months in your lease or the number of months you plan to keep the car ('Sell After' months).
Financed Amount Lease: Similar to the loan amount in a traditional loan. This is basically the amount you need to pay back plus interest (lease fee). The net capitalized cost minus the vehicle's residual value at the end of the lease is the amount the leasing company is 'loaning' you.

Loan: Your total auto loan amount once 'Sales Tax' and 'Total Financed Add-on Costs' are added and 'Total Cost Reductions' is subtracted.
Total Interest Total amount of interest you will pay over 'Length of Loan'.
Total Payments The total of monthly payments for the entire lease or loan.
Real Total Cost The real cost of your lease or loan has to consider the amount you paid as a down payment, the value of any vehicle you traded in, and the value you can get when you sell or trade in this vehicle when you're done with it.
Number Payments The number of monthly lease or loan payments you will make over 'Length or Lease/Loan'.
Monthly Depreciation Fee Each month you pay an equal portion of the total expected vehicle depreciation. The depreciation fee is to pay the leasing company for the vehicle's loss in value over the length of the lease.
Monthly Lease Fee Sometimes called finance fee. The portion of your monthly payment that covers the lease fee. The lease fee is the way the leasing company charges interest for the use of their money. However, the lease fee is not amortized as interest is in a traditional loan. The formula has been simplified then figured into each payment equally throughout the lease.
Monthly Sales Tax The amount of sales tax you pay each month. Sales tax is paid on the depreciation fee plus the lease fee.

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All calculators are made available as self-help tools for your independent use with results based on information provided by the user. All examples are hypothetical and are for illustrative purposes only. Calculated results are believed to be accurate but results are not guaranteed. Loan calculators are not intended to provide financial advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. Users are advised to seek personalized advice from qualified professionals regarding all personal finance issues.
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Updated 04 Jul 2007