Lease vs. Finance: Cracking the Code on Car Payments!

Cracking the Code on Car Payments!

LEASE:  $40,000 sale price, less a $20,000 buy back (residual). $20,000 divided by a 48-month term = $416.67 per month. (Note:  since our example is assuming a 0% interest rate, there was not an interest charge to be added to the payment).

LOAN (Finance):  $40,000 sale price divided by the same 48-month term = 833.33 per month (double the lease payment but the loan is paying off the whole vehicle).

After considering this example, you might wonder why everyone doesn’t lease their new vehicle. That would be the case if banks and car manufacturers’ (OEM) finance companies only offered 48-month terms. However, both banks and OEM finance companies also offer longer-term financing options, such as 60, 72, 84 and even 96-month terms.

New car dealership financial service offices have effectively promoted the 84-month (seven-year) finance term to compete directly with the lower 48-month lease payment. Using the same example, an 84-month loan for a $40,000 vehicle would result in a monthly payment of $476.19, which is very close to the 48-month lease payment.

New car dealership financial service offices have effectively promoted the 84-month (seven-year) finance term to compete directly with the lower 48-month lease payment. Using the same example, an 84-month loan for a $40,000 vehicle would result in a monthly payment of $476.19, which is very close to the 48-month lease payment.

I compared several 48-month lease calculations with 84-month loan calculations for various popular vehicles. The lease payments ranged from $12 to $55 less per month than the loan payments. As mentioned, OEMs often alternate between offering better interest rates for leases one month and better rates for financing the next. Therefore, it’s crucial to always request comparable quotes for both payment options.

In conclusion, you’ve learned about the term lengths that can equalize the monthly payments of a lease and a loan. With this knowledge, you can create a shortlist of new vehicles you’re interested in and use a lease/loan calculator to see if they fit your budget.

Go to CarCostCanada.com and use their build, price and calculator tools to come up with your vehicle shortlist and put you on the right road to making the best vehicle purchasing decision. CarCostCanada is a one-stop shopping tool that allows you to do all the pricing research on one website as opposed to bouncing around several OEM websites.


Need to exit your lease? Get a free evaluation and market position assessment of your lease, and start the exit process today.

Click Here…


Looking to take over an amazing lease? Enjoy short terms, cash incentives, and zero money down at signing. Plus, explore a wide selection of new vehicle leases!

Click here…


Discover LeaseBusters’ top dealership partners, known for exceptional service and exclusive deals. Whether leasing or financing, these innovative dealerships offer a smooth, hassle-free experience. Find out why they’re trusted to deliver the best in customer care and value.

Read More…