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Lease Vs. Buy A Car
Before you compare potential, you must first decide whether you would like to lease or buy your next vehicle. Use this calculator to find out which is best for you and estimate savings potential. Simply enter information on the price of purchase and down payment to calculate anticipated monthly payments and the total net cost.
Calculate the savings you could save A big decision is whether to purchase or lease an automobile. This tool will calculate the monthly payment and the net cost. By comparing these numbers and comparing them against each other options, you will be able to determine which option is better for you.
Definitions
PRICE OF BUY
Total purchase price. Price must be before any rebate offered by the manufacturer.
DOWN PAYMENT
A sum paid as a down payment, which for leases is commonly referred to as a capital reduction.
SALES TX RATE
Percentage sales tax that will be imposed on the purchase. The sales tax will be included in every lease payment. Sales tax on purchases is charged on the total value of the sale.
INVESTMENT RATE of RETURN
Rate of return on investments. This is the return that you would make in the event that you invested your security deposit or down payment instead of putting it into your lease or auto purchase. The actual rate of return is largely dependent on the types of investments you choose. The Standard and Poor’s 500(r) (S&P 500(r)) for the 10 years ending December 31 , 2016 earned an annual compounded rate of return of 6.6 percent, including dividends reinvestment. 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). Since 1970, the highest 12 month return was 61% (June 1982 to June 1983). The lowest return of 12 months was 43 percent (March 2008 through March 2009). Savings accounts at a financial institution may offer as low as 0.25% or less but carry significantly lower risk of losing principal balances. It is vital to note the fact that all of these situations are only hypothetical and that the future rates of return can’t be forecast with absolute certainty. It is also important to remember the investments that offer more in return generally come with higher risk and greater volatility. The actual rate of return on investments could vary dramatically over time, and especially when it comes to long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index, and the compounded return rate mentioned above is not reflected in sales charges and other fees that Separate Account investment funds or investment firms may charge.
LOAN TIME IN MONTHS
The length of time for your car loan. The most common is 36 48, 60, or 72 months. If you’re loan period is longer than the lease term then we will examine the buy vs. lease options prior to when the lease expires. We then apply the resting loan term to calculate your outstanding loan amount.
LOAN INTEREST RATE
Annual interest rate applicable to your loan.
Other FEES
Any other fee, besides a capital reduction or down payment, that must be paid in full at moment of purchase. This could include license fees charges, title transfer fees and so on.
ANNUAL DEPRECIATION
The rate of depreciation gauges how fast your new automobile will decrease in value. A high depreciation rate is about 20 percent per year. Medium is 15 percent annually, and the lowest rate is 10 10% per year.
MARKET VALUE OF VEHICLE
The value of your car after lease term completed.
NET COST OF BUYING
It is the total cost of buying your vehicle. This is calculated as total up-front expenses (down payment + other costs) + lost interest outstanding loan amount at the time lease expires. Market value of the vehicle when lease expires = net cost of purchasing The lost interest you paid on the purchase is the interest you earned at your investment rate of return the purchase option’s down payment as well as other fees. If the monthly installment for leasing is less than the monthly payment to purchase, this includes any lost interest due to the higher monthly payments. If leasing is more costly than buying, your interest costs for buying are reduced by the amount of interest you would earn on the difference.
Lease Term in Months
Term in months for your auto lease.
Lease Term in Months
Annual rate of interest for your lease.
OTHER FEES
Any other fee, besides an capital reduction or a down payment, that is required to be paid upon the expiration period of lease. This could include license fees charges, title transfer fees and so on.
Percentage of RESIDUAL
For leases, this represents the remaining value following the lease term has ended. The greater the amount is, the less your lease payment will be.
SECURITY DEPOSIT
Refundable security deposit required at moment of leasing. We assume that the security deposit will be fully refunded at the time the lease ends.
NET COST OF LEASE
It is the total cost you pay for leasing your car. It is calculated as follows total up-front costs (capital reduction + other charges) + Total lease payments + Lost the interest earned on lease = Net Cost of Lease The loss of interest from your lease will include any interest you would have accrued at your rental rate of return the lease option’s down payment, security deposit and other fees. See the definition of ‘Net cost of buying’ to learn more about how we calculate the interest you could earn by having less of a monthly lease payment.
How do you calculate the potential savings? To effectively calculate if buying or leasing your next vehicle is right for you, you must first enter the vehicle information. This is the purchase price, vehicle down payment along with the expected rates of sales taxes. After the calculator has collected those starting numbers check the net cost for buying or leasing the vehicle. Then , enter the anticipated term and the interest rates for both. The net cost of buying will be determined by adding the upfront costs — down payment, taxes and fees — loss of interest, along with the fair market value for the vehicle. Compare this figure with the net cost of the lease, which is the combination of the upfront costs, lease payments and lost interest for the lease. Take a look at the two numbers on the graph to determine which one is more affordable.
Leasing and buying definitions
Annual depreciation The rate of depreciation gauges how fast your new vehicle will decrease in value. A high rate of depreciation is 20% per annum, medium is around 15 percent annually and the lowest is 10 percent per annum.
Down payment The amount that is paid as a down payment which is for leases, is typically known as a capital reduction.
Investment rate of return Rate of returns on investments. This is the amount of money you could earn if you were to invest your down payment or security deposit instead of investing it for your auto purchase or lease. The actual return for investments may vary over time, especially for investments that are long-term. This includes the possibility of losing of principal from your investment.
Interest rate on lease Annual rate of interest for your lease.
Lease term in months by months to be used for the automobile lease.
Interest rate on loans Annual interest rate for your loan.
The loan term is in months. term in months for your auto loan. It is usually 36, 48, 60 or 72 months. If you’re loan period is longer than your lease term, we compare the buy and lease options with respect to the point at which the lease expires, and then we use the remainder of your loan period to determine your outstanding loan balance.
Value of your vehicle in the market of your auto after the lease period is up.
Net price of leasing This is the total cost of leasing your vehicle. This is calculated using: Total upfront costs (capital reduction + other fees) + total lease payments plus lost rental interest = Net cost of lease The lost interest on leases includes the interest you would have earned based on the rate of return you earn for the lease option’s down payment, security deposit and other fees.
Net price of purchase This is the total cost of purchasing your vehicle. It is calculated using the following: Total upfront cost (down payment and other charges) + lost interest Outstanding loan amount at the time lease expires — Market value of the vehicle when lease expires = Net price of purchasing The lost interest on your purchase includes the interest you could have earned on your investment rate of return for the buy option’s initial down payment and other charges.
Other fees Any fee other that a capital reduction or down payment, required to be paid at the moment of the purchase or at the end of the lease. This could include license, title transfer fees and other costs similar to these.
Purchase price Total price of purchase. Price should be after any rebate from the manufacturer.
Residual percent for leases, this is the remaining value after the lease term expires. The more you pay, the lower your lease payment will be.
Sales tax rate Sales tax Percentage to be imposed on this purchase. The sales tax will be included into every lease payment. Sales tax for buying is imposed on the entire value of the sale.
Security deposit Security deposit Refundable to be paid at the time of lease. We will assume that security deposit will be fully refunded by the time the lease comes to an end.
Is it better to lease or buy an automobile? The decision to purchase or lease your next car is based on the number of miles you intend to drive and the amount that you’re willing to invest. There is no golden standard to follow when selecting the right car for you, but rather takes some reflection on your lifestyle and financial budget. a car tends to cost less per month and gives you the opportunity to take the wheel of a better-quality vehicle. But it does mean mileage limitations and limitations on the limits of the vehicle. puts you in total control of the vehicle, meaning you won’t have to be concerned about keeping the track of the mileage on the odometer, or any additional cost for wear-and-tear on your vehicle.
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