To lease or not to lease. Is it really better to buy? This calculator determines your monthly payments and your entire net cost. Simply by comparing these totals, you will be able to figure which option is a better value for you.

Term in months

This is the length of time the auto lease or auto loan covers, in months.

Down payment

Often called a "capital reduction" when leasing, this is the initial amount of money you put down.

Other fees

Describes all fees, other than a capital reduction or down payment which must be paid at the lease or loan closing. This often includes license, title transfer fees, etc.

Purchase price

Total price of the purchase. This amount should be determined after any manufacturer's rebate.

Interest rate

This is the rate of yearly interest (APR) on your loan or lease. This is the rate which is charged or paid for the use of money. It is expressed as an annual percentage of the principal. It's calculated by dividing the amount of interest by the amount of principal.

Sales tax rate

Percentage of sales tax scheduled to be charged on this purchase. Sales tax is included in each lease payment. The sales tax for purchasing is charged on the entire sale amount.

Rate of depreciation

This number measures how quickly your new auto will lose its market value. A high depreciation rate is around 20% per year, medium is 15% per year, and low is 10% per year. If you buy a vehicle for $20,000, and it has a high rate of depreciation, then after one year, it will be worth $16,000.

Residual percent

In lease programs, this is the left-over value after the lease term ends. The higher this amount, the lower your lease payment (because the dealer is getting back a more valuable vehicle).

Market value of vehicle

This is what you auto is worth after the lease term ends.

Investment rate of return

Simply, how much money you would have made if you had invested your down payment or security deposit instead of using it for your auto purchase or lease.

The actual rate of return depends on the type of investment. Over almost the last 40 years, the average rate of return has been about 11.4% per year (source: www.standardandpoors.com). By comparison, bank savings accounts pay out as little as 1% or less per year.

Lost interest on buy option

This is interest you would have earned (at the investment rate of return) on the down payment and other fees, with the buy option. This includes any lost interest due to higher monthly payments, if the leasing monthly payment is less than the buying monthly payment. If leasing is more expensive than buying, your interest costs for buying would be reduced by the amount of interest you would earn on the difference.

Lost interest on lease option

This is interest you would have earned (at the investment rate of return) on the down payment, security deposit and other fees, with the lease option. This includes any lost interest due to higher monthly payments, if the leasing monthly payment is more than the buying monthly payment. If leasing is less expensive than buying, your interest costs for buying would be increased by the amount of interest you would earn on the difference.