This comprehensive tool will calculate whether it is a better financial decision for you to buy or lease your next car.

Buy entering the cost of the vehicle, your down payment, tax, title, registration fee, years to lease (if leasing), monthly payments, miles driven, and APR we can determine whether it is in your financial interest to buy or lease your next vehicle.

After entering the information, an instant result will be calculated including:

• Total Cost for both buy and lease.
• Initial Cost for both buy and lease options. In addition, money down, trade in, tax, title and registration.
• Recurring Cost Per Month. Such as payments, gas, insurance, maintenance and overage miles.

Differences Between Leasing and Buying

The sale price of the car is important whether you finance or lease, and it can be negotiated in either case unless you're at a no-haggle dealership. Many lessees have unwittingly paid way too much for a leased vehicle by concentrating on the low monthly payment rather than the price of the car, the lease fee and the length of the lease. In the past, lessees often didn't know the vehicle price at all, especially before the Federal Reserve Board revised its Consumer Leasing Act (Regulation M) to require full disclosure of all costs. (Regulation M went into effect on Jan. 1, 1998.) Most experts recommend that you negotiate a price with the seller before you discuss your financing or leasing intentions.

The size of the down payment affects loans and leases similarly. With a loan, it reduces the amount of money you're borrowing, and thus the amount for which you'll pay finance charges. With a lease, for which a down payment is not always required, it's simply an advance against the vehicle's depreciation. In both cases, higher down payments result in lower monthly payments.

It's easy for consumers to think in terms of what they can afford on a monthly basis and overlook how much they end up spending in the long run. Finance and lease charges are part of the cost of financing and leasing, but you still have some control over how high they are - thanks to the variability of the sale price, annual percentage rate or money factor, term and monthly payment, all of which are interrelated.

Finance and lease charges are not the same. Finance charges for a loan are a simple annual percentage rate (APR), such as 9.5 percent - familiar to anyone who has taken out a loan or mortgaged a home. They represent the percentage of the loan amount that you will pay annually for the privilege of borrowing the money. In a lease, the lessor uses the money factor, a fractional number, such as .0042, to calculate the lease fee or charge. The monthly payment combines the resulting fee with the depreciation charge. Neither the money factor nor the lease charge are an interest rate in the traditional sense; they are part of a formula devised by lessors to determine their profit. (Without some profit, they wouldn't be in the leasing business.)

Bearing in mind that financing builds equity in the vehicle and leasing does not, finance and lease charges are comparable in the sense that each represents the cost of financing or leasing. Consumers should look for a lower APR or money factor. It's difficult to compare money factors in the range of, typically, .002 to .005. To better understand the impact, multiply the money factor by 2400 to arrive at a percentage that is in the same ballpark as the annual percentage rates with which we're accustomed. This percentage is more useful in comparing leases with each other than with loans, however, because it doesn't account for all fees and, once again, because only loans build equity. The relative incompatibility of the money factor and APR is no error. Regulation M mandates that terms like APR not be used in lease terminology to reduce the possibility that consumers will believe they are building equity, and to emphasize that a rate of 9.84 percent (.0041 x 2400) on a lease is not necessarily a better deal than a 10.4 percent APR on a loan, all other factors being equal.

How Loan and Lease Terms Compare

There are three ways to pay for your new car:

1. Cash
2. Borrow money from the dealership, a bank or credit union
3. Lease the car

If you have the cash to buy a new car outright-congratulations. You must be doing something right. Besides, paying cash makes the negotiation process simple - you focus on only one number: the purchase price.

Most people, however, will probably have to make a choice between buying the car (and making monthly payments) or leasing the car. There are advantages to each method.

The lists below point out the pros and cons of leasing versus buying:

• Lower monthly payments
• Lower down payment
• You can drive a better car for less money each month
• Lower repair costs (with a three-year lease, the factory warranty will cover you)
• You can drive a new car every two or three years
• No trade-in hassles at the end of the lease
• You pay sales tax only on the portion of the car you finance

• You don't own the car at the end of the lease
• Your mileage is limited, typically 10,000 to 15,000 a year
• Lease contracts are confusing because the terminology is unfamiliar
• Leasing is more expensive in the long run
• Wear-and-tear charges can add up
• It's hard to terminate a lease early if your driving needs change

• Pride of ownership - you can do with your car as you please
• Car buying is more economical in the long run
• No mileage penalty
• Increased flexibility - you can sell the car whenever you want

• Higher down payment
• Higher monthly payments
• You are responsible for maintenance costs (or have to buy an extended warranty)
• Trade-in or selling hassles
• Your money is tied up in a car, which depreciates, rather than an investment which appreciates

Certain lifestyles may work better with leasing. For instance, if you entertain business clients, leasing allows you to drive a luxury vehicle for less money (and there may be a tax write-off for certain professions). Other people just like to drive a brand-new car every two or three years. So ultimately, leasing isn't only a dollars-and-cents question-it's about personal tastes and priorities.

If you have decided to finance your new car, you can borrow money from the dealership, a bank or credit union. You can also go online to check interest rates from independent lenders.

It's a smart move to arrange financing before you go to the dealership. This helps in several ways:

• You are sure to get a competitive interest rate on the length of the loan you desire.
• You can analyze your financial situation in a relaxed setting, rather than squinting at fine print in the dealership sales office.
• Prearranged financing removes one more variable from the buying process and allows you to concentrate on negotiating the purchase price of the car only.

With your financing in place, you're now in a position of power when you are buying a car. When dealership financing is offered, you can take it or leave it. If the interest rate is lower (dealers can offer very low interest rates), you can take it. If not, you can leave it. But remember, if suspiciously low financing is offered, make sure the term - the length of the loan - is the same. When in doubt, do the math yourself.