Loan vs Lease Calculator
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Deciding whether to finance a purchase (like a car) with a loan or to lease it is a major financial decision. Both have pros and cons, and the best choice depends on your financial situation and how you plan to use the asset.
Buying with a Loan
When you buy, you're paying for the entire value of the asset. Your payments are higher, but at the end of the loan term, you own it outright. The asset's resale value at that time is a key factor in the total cost of ownership. You build equity and can sell the asset at any time.
Leasing
When you lease, you are essentially renting the asset for a fixed period. Your monthly payments are typically lower because you're only paying for the depreciation of the asset during the lease term, plus interest. At the end of the lease, you return the asset and have no equity.
Logic & Formulas
The calculator compares the total net cost of both options over the specified term.
Loan Option Cost:
- First, it calculates the monthly loan payment using the standard amortization formula (see Loan Calculator page).
- Then, it calculates the total cost of buying. This is not just the sum of payments, but the net cost after accounting for the asset's future value.
Total Loan Cost = Down Payment + (Monthly Payment * Term in Months) - Resale Value
Lease Option Cost:
The cost of leasing is more straightforward.
Total Lease Cost = Initial Payment + (Monthly Lease Payment * Term in Months)
The calculator then shows the difference between these two total costs to determine the financial advantage of one option over the other.