1. What is Leasing vs Financing Cost Comparison?

The leasing vs financing calculator compares the total costs of leasing an asset versus financing its purchase. This helps individuals and businesses make informed financial decisions about asset acquisition.

2. How Does the Calculator Work?

The calculator uses these simple formulas:

Where:

• \( MP_{\text{lease}} \) — Monthly lease payment ($)
• \( MP_{\text{finance}} \) — Monthly finance payment ($)
• \( T \) — Term length in months

Explanation: The formulas calculate the total out-of-pocket cost for each option over the entire term period.

3. Importance of Cost Comparison

Details: Comparing total costs helps identify the most economical option, though other factors like tax implications, usage needs, and asset ownership should also be considered.

4. Using the Calculator

Tips: Enter accurate monthly payments for both options and the term length. The calculator will show total costs and the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: What's included in the monthly payments?
A: For accurate comparison, ensure both payments include all relevant costs (taxes, fees, insurance if applicable).

Q2: Does this account for residual value?
A: This basic calculator doesn't. For leases with buyout options, additional calculations would be needed.

Q3: What about interest rates?
A: The finance payment should already reflect the interest rate through the monthly payment amount.

Q4: How does term length affect the comparison?
A: Longer terms generally make leasing more attractive, while shorter terms may favor financing.

Q5: Should I always choose the cheaper option?
A: Not necessarily. Consider other factors like maintenance costs, upgrade flexibility, and your financial situation.