Should You Lease or Buy Your Next Car?
Trying to decide whether to lease or buy a car? It's a tough choice! One gives you cheaper monthly payments, while the other gives you a car that you actually own. Using our Lease vs. Buy Calculator above is the smartest way to figure out what makes sense for your wallet. Let’s break down how this works.
What the True Net Cost Tells You
If you look only at the monthly payment, leasing always wins. But that’s a trick! When you buy a car, your payments eventually stop, and you have a car you can sell. When you lease, you return the car and get nothing back.
Our calculator figures out the True Net Cost. This takes all the money you pay out of pocket (down payment and monthly payments) and subtracts the money you’ll get back if you sell the car at the end of the term. This lets you compare apples to apples.
Why Buying is Great
- Once it's paid off, you drive for free.
- No mileage limits. Drive as much as you want!
- You can customize the car.
- No stress about minor scratches or wear.
- Financially smarter if you keep cars for 5+ years.
Why Leasing is Great
- The monthly payments are usually much cheaper.
- You get to drive a brand-new car every few years.
- The car stays under the factory warranty.
- You don’t have to worry about the car losing value (depreciation).
- Might be tax-deductible for business owners.
Understanding Lease Jargon
Leasing has its own language. Understanding these terms will help you use the calculator like a pro:
- MSRP (Sticker Price): The suggested price of the car. Leases base the car's future value off this number.
- Capitalized Cost (Cap Cost): The actual price you negotiate. Yes, you should always negotiate a lease price!
- Residual Value: What the car will be worth at the end of the lease. A car that holds its value well (high residual) will have cheaper lease payments.
- Money Factor: This is the interest rate on a lease, written as a tiny decimal. To see what the normal interest rate (APR) is, multiply the money factor by 2,400.
How to Pick the Best Option
As a general rule, if you drive less than 12,000 miles a year, like having the newest safety features, and don't want to worry about repairs, leasing is a great lifestyle choice. But if your goal is to build wealth and minimize your bills, buying a car and keeping it for a long time is the undefeated champion of saving money.
Run your numbers through the Car Loan Calculator and this lease comparison tool to ensure you're making the absolute best move for your finances!