Thrivent Financial for Lutherans -

Buy or Lease?

Should you lease or buy your car? Use this calculator to find out! We calculate your monthly payments and your total net cost. By comparing these amounts, you can determine which is the better value for you.

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Definitions

Term in months

Term in months for your auto lease or your auto loan.

Down payment

Amount paid as a down payment, which for leases is often called a capital reduction.

Other fees

Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease or loan. This may include license, title transfer fees, etc.

Purchase price

Total purchase price. Price should be after any manufacturer's rebate.

Interest rate

Annual interest rate for your loan or your lease.

Sales tax rate

Percentage sales tax to be charged on this purchase. Sales tax is included in each lease payment. Sales tax for buying is charged on the total sale amount.

Rate of depreciation

The rate of depreciation gauges how fast your new automobile will lose its market value. A high depreciation rate is about 20% per year, medium is 15% per year and low is 10% per year.

Residual percent

For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.

Market value of vehicle

Value of your auto after the lease term is over.

Investment rate of return

Rate of return on investments. This is the return that you would make if you were to invest your down payment or security deposit instead of using it in your auto purchase or lease.

The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2007, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.4% per year (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank may pay as little as 1% or less.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for 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 rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Lost interest on buy option

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

Lost interest on lease option

This includes any interest you would have earned at your investment rate of return on the lease option's down payment, security deposit and other fees. Please see the definition for "Lost interest on buy option" for an explanation on how we account for any interest you might earn by having a lower monthly lease payment.

These interactive calculators are not intended to provide or replace specific professional financial advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical, are for illustrative purposes only, and may differ from more in depth analysis results. They do not represent the past performance of any specific product, nor should they be viewed as a promise of future results of any product offered by Thrivent Financial for Lutherans or its affiliates. We encourage you to seek personalized analysis regarding all personal finance issues.