Auto Loan Calculator (Lease vs Buy + TCO)
Auto loan calculator with lease vs buy comparison, 5-year TCO including depreciation, trade-in analysis, and APR/money factor conversion. 2026 market rates by credit tier.
Based on 3 official sources↓Monthly payment
US$618.65
Total paid
US$37,118.98
Total interest
US$5,118.98
APR (with fees)
6.00%
Principal financed: US$32,000.00
TCO (5-year total cost)
US$70,278.40
US$14,055.68/year · US$1,171.31/month
- Down payment
- US$8,000.00
- Loan payments
- US$37,119.00
- Depreciation
- US$18,829.70
- Maintenance
- US$4,000.00
- Insurance
- US$9,000.00
- Fuel
- US$12,000.00
- Registration/taxes
- US$2,500.00
- Car value at end (asset retained)
- -US$21,170.30
- Equity at end
- US$21,170.30
Depreciation projection
Cumulative depreciation: 47.1% (US$18,829.70)
The monthly payment is the smallest part of what your car costs you. A $40,000 new car at 6% APR over 60 months has a $618 payment, but the actual cost over 5 years — including depreciation, maintenance, insurance, fuel, and registration — runs above $110,000. That depreciation line alone is $19,000 over 5 years on a typical new vehicle. The car loses 20% of its value the day you drive it off the lot, regardless of how well you negotiated the price.
This calculator shows the full picture: monthly payment + APR with origination/closing/PMI fees, 5-year TCO (Total Cost of Ownership) with depreciation modeled year by year, lease vs buy comparison over 3 years, and trade-in analysis (including underwater detection when you owe more than the car is worth). Numbers in the worked examples below were generated by running the calculator itself.
The math uses 2026 conventions: standard amortization (Price / French system), APR per Truth in Lending Act / Reg Z (12 × monthly rate, simple), depreciation curves from Edmunds/Kelley Blue Book averages, and lease formulas from the standard money-factor model (MF = APR ÷ 24 in decimal, MF × 2400 in industry-percent convention). Auto loan caps at 84 months — anything longer is structural underwater risk.
The four numbers that define a car deal
Monthly payment. Standard auto loans are Price (French amortization): PMT = P × r / (1 − (1 + r)^−n). The lender quotes APR — divide by 12 for monthly rate (Reg Z). Each payment shifts: early on most goes to interest, by the end most goes to principal. The amortization schedule shows the split; the calc renders the full table.
APR with fees. APR is what Truth in Lending Act / Reg Z requires lenders disclose: rate + origination fee + closing costs (rare on auto loans). For mortgages, it also includes PMI. When two lenders quote 5.99%, their APRs can differ by 1+ point depending on fees — APR is the apples-to-apples comparison.
Depreciation. The biggest single cost of a new car. A typical vehicle loses 20% of value in year 1, another 15% in year 2, ~10% in year 3 — total ~45-50% in 3 years, ~55-60% in 5. The calc projects year-by-year using Edmunds/KBB averages (or a custom curve if you know your model's specific depreciation). On a $40k new car, that's $19-24k of value lost over 5 years.
TCO (Total Cost of Ownership). Sums everything: down payment + loan payments + depreciation + maintenance + insurance + fuel + registration − car value at end. The car-value-at-end is subtracted because you still own that asset. For a $40k new car driven 5 years, US TCO typically runs $50-60k of out-of-pocket cost. The 'free' part of buying a car (vs leasing) is the equity you build — but only if you keep driving it past the loan term.
Lease vs Buy. Different math, not just different payment. Lease: capitalized cost − residual value, divided by term, plus rent (money factor × (cap + residual)) + tax. Buy: amortized loan + equity build. Over 3 years, lease typically has lower monthly payment but $0 equity at end. Buy has higher payment but $10-15k of equity. The calc compares both at 3-year horizon — the question isn't 'which is cheaper monthly' but 'which is cheaper net over 3 years'.
Money factor. Lease lenders quote in 'money factor' instead of APR. MF = APR ÷ 2400 when APR is in percent, OR APR_decimal ÷ 24. So 0.00208 ≈ 5% APR. Dealers quote in MF because the small decimal looks better than the percent. Always convert and compare against typical auto rates (~5-7% for prime credit in 2026).
PMT = P × r / (1 − (1 + r)^−n) · r = APR ÷ 12 (Reg Z) Lease MF = APR_decimal ÷ 24 · Effective APR = MF × 24 TCO = down + payments + depreciation + opex − car_value_at_end
- P
- Principal (price − down − trade-in net)
- APR
- Annual Percentage Rate per Reg Z (decimal)
- MF
- Money factor — lease industry convention
- Residual
- Estimated value at lease end (% of MSRP, 50-65% typical)
- Equity
- Car value at end − remaining loan balance
Practical examples
New car $40k, $8k down, 6% APR, 60 months — payment $619, 5-year TCO ~$110k
Setup: Standard new-car deal. Super-prime APR (6%, slightly above the Bankrate 4.66% best-rate average for 781+ FICO). $8k down (20% — the threshold below which rates climb). 60-month term. Used as the widget default for US scenarios.
**Loan:** Principal $32,000. PMT = 32k × 0.005 / (1 − 1.005^−60) = **$618.65/mo**. Total payments $37,119. Total interest **$5,119**. APR 6% (no origination fee in this scenario). **Depreciation 5y:** $40k → $32k → $27.2k → $24.5k → $22.5k → **$21,170** at end of year 5 (47% cumulative loss = $18,830). **TCO 5y:** down $8k + payments $37,119 + depreciation $18,830 + maintenance $4k ($800/y) + insurance $9k + fuel $12k + taxes $2.5k − car value $21,170 = **$110,278 total** ($22,056/year, $1,838/month).
Takeaway: Looking only at the $619 payment is a 30% view of the actual cost. Real ownership math: you pay almost $2,000/month when you account for depreciation and operating costs. That's why two cars with the same payment can be wildly different deals — the one that depreciates slower (Toyota, Honda) is materially cheaper to own. Run the calc with model-specific depreciation if you have it.
Lease $40k MSRP at 5% (MF 0.00208), 60% residual, 36 months
Setup: Standard lease deal at lower-than-buy APR (lease lenders typically charge less because they retain ownership). $0 down, 60% residual ($24k assumed end-of-lease value), 36-month term, 6% sales tax (US average).
**Capitalized cost:** $40k − $0 down = $40k. **Residual:** $40k × 60% = $24k. **Depreciation fee:** ($40k − $24k) / 36 = $444/mo. **Interest fee:** ($40k + $24k) × 0.00208 = $133/mo. **Pre-tax payment:** $577. **Tax (6%):** $35. **Monthly: $612.21.** **Total lease payments:** $22,040. **Effective APR:** 0.00208 × 24 = 4.99% ≈ 5%. **Mileage:** if you exceed the cap (12k typical), every mile over costs $0.20. 5,000 miles over 3 years = $1,000 extra cost.
Takeaway: The lease payment ($612) is similar to the buy payment ($619 from the previous example) — but at the end of 3 years, the buyer has equity in a depreciated car ($24k value − ~$15k remaining balance = ~$9k equity); the leaseholder has $0 plus possibly a disposition fee. That equity gap is where buy wins for long-term holders. The lease wins for filers who want a new car every 3 years and stay within the mileage cap.
Lease vs Buy 3-year comparison — same $40k car at 6% APR
Setup: $40k MSRP, $0 down. Lease: 60% residual, 36 months. Buy: 60-month loan at 6% APR, analyzed at 3-year horizon (when lease ends).
**Lease 3y:** $612/mo × 36 = $22,040 + $600 acquisition + $400 disposition = **$23,040 total** (with mileage within cap). **Buy 3y:** $773/mo × 36 = $27,818 of payments. Remaining loan balance after 36 months: ~$17.5k. Car value at year 3: $24,480. **Equity at year 3:** $24,480 − $17,500 = **$6,980**. **Buy net cost 3y:** $27,818 − $6,980 = **$20,838**. **Difference:** lease costs $23,040, buy costs $20,838 net — **buy saves $2,200 over 3 years**.
Takeaway: Buy wins by $2,200 here because the equity built ($6,980) more than offsets the higher cumulative payments. Lease still makes sense if: (a) you want a new car every 3 years, (b) maintenance worry-free under warranty matters, or (c) your mileage genuinely fits the cap. If you'd keep the bought car past year 3, the buy advantage compounds — the equity you built keeps working as down payment for the next car.
Underwater trade-in: owe $8k on a car worth $6k
Setup: Trading in a 4-year-old car you owe $8,000 on, but it only appraises at $6,000. The $2,000 gap is "underwater" — you owe more than the asset is worth. Common scenario when the trade-in loan was 72-84 months on a heavily depreciating car.
Trade-in net = $6k − $8k = **−$2,000 (underwater)**. Most lenders allow rolling the underwater amount into the new loan, so a $40k new car becomes effectively a $42k loan at the new rate. **Cost of the roll:** $2,000 × 5 years × ~7% = ~$700 of additional interest, plus another ~$45 of fees. The car is also more likely to stay underwater longer because the new loan starts $2k below water on day 1.
Takeaway: The calc surfaces this as a critical warning. Two ways out: (1) pay off the underwater amount in cash before trading, or (2) drive the current car longer until the loan catches up to the value. Rolling underwater debt into a new loan creates a depreciation-debt spiral that takes 4-5 cars to escape. The cleanest fix is the slowest one: drive the current car until you have positive equity.
Used car $25k at 8.86% APR (near-prime credit), 48 months
Setup: 3-year-old used car. Near-prime credit (FICO 601-660), Bankrate avg APR 8.86% for that tier. No down payment, 48-month term. Tests how non-prime credit affects the math.
**Loan:** $25k × 0.00738 / (1 − 1.00738^−48) = **$620/mo** (approximately). Total payments ~$29,760. Total interest **~$4,760**. APR 8.86% (no fees). **Depreciation (used 3y vehicle, 5y projection):** $25k → $22.5k → $20.7k → $19.3k → $18.2k → **$17.4k** (30% cumulative).
Takeaway: Near-prime APR (8.86%) costs you $1,800 more in interest over 48 months vs prime APR (4.66%) on the same loan — same monthly payment difference of about $40, summed across 4 years. If you can wait 6-12 months, improving your FICO from 640 → 720 (paying down credit cards, no late payments) saves ~$1,800-2,500 on a typical used-car loan. The credit bureaus update monthly; small actions matter.
How to negotiate and avoid common mistakes
- Compare APR, not interest rate — and not 'monthly payment'. The dealer's most powerful tool is steering you to focus on monthly payment alone. APR includes fees; payment hides them. Always pull the APR (Reg Z disclosure is mandatory) and run the math at 36, 48, 60 months to see the trade-off.
- Don't take 72+ month auto loans on new cars. Cars depreciate faster than the loan amortizes in years 1-2. A 72-month loan on a typical new car puts you underwater for the first 30-36 months — meaning if you need to sell or trade, you owe more than the car is worth. 60 months max is the rule of thumb.
- Negotiate the price first, financing second. Dealers profit on both the car and the loan. Quoting a target monthly payment lets them adjust the term or fees to fit, while leaving the actual price unclear. Negotiate the out-the-door price first (tax + fees included), then finance independently — credit unions often beat dealer financing by 1-2 percentage points.
- For lease, negotiate the money factor — it's not fixed. Dealers have markup room on the MF. The 'buy rate' (what the lender charges) is usually 0.0005-0.001 below the 'sell rate' (what the dealer quotes). Ask for the buy rate. On a $40k 36-month lease, dropping MF from 0.00208 to 0.00158 saves $32/month ($1,150 over the lease).
- Calculate mileage overage before signing. The lease cap (10-15k miles/year) is a hard constraint. If you drive 18k/year, the 3-year overage at $0.20/mile is $7,200 — wipes out any monthly savings from leasing. Buy if your mileage is materially over the typical cap, or negotiate up-front for a higher cap (typically $0.05-0.08/extra mile).
- Trade-in: get appraisals from 3 sources before trading. Dealer trade-in offers are typically 10-20% below KBB private-party value. Selling private-party gets more cash but takes time and skill. CarMax/Carvana offer-to-trade values are competitive baselines. Always compare.
- Be wary of 'packages' that bundle financing with extras. Dealer-bundled extended warranties, gap insurance, and pre-paid maintenance often cost 2-3× what they'd cost à la carte. The transparency drops when bundled into the financing — you don't see the line-item cost. Decline anything that wasn't part of the original negotiation.
Limitations
Model-specific depreciation. The calc uses average curves (Edmunds/KBB blended). A Toyota Tacoma or Lexus NX retains ~65-70% over 3 years; a luxury BMW or low-volume EV may drop to 40-50%. Run with a custom curve if you know your model's actual data — published in Edmunds True Cost to Own reports.
Federal/state EV incentives (US). Federal $7,500 credit for qualifying EVs, state-level credits ($2-7k typical), utility company rebates. The calc doesn't model these — subtract from the effective vehicle price before running.
Lease tax conventions vary by state. The calc uses the most common 'tax on monthly payment' model. Some states (TX, GA) tax the full vehicle price upfront; others tax only the depreciation portion; a few don't tax leases at all. Verify with your state's DMV.
Variable-rate loans. Some credit-union and online lenders offer variable APR. The calc assumes fixed for the loan life — a variable-rate loan needs to be modeled at multiple rate scenarios.
Used-car loan term limits. Most US lenders cap used-car loans at 60 months for vehicles 5+ years old, 72 months for newer used vehicles. The calc allows up to 84 but real lenders may not.
BR consórcio variability. Real consórcio outcomes depend on monthly drawing (sorteio) results and lance (bid) strategy — the calc treats it as fixed prazo with diluted admin fee. For planning purposes, the average cost is reasonable; for cash-flow timing, real consórcio is much more variable.
Dealer add-ons (paint protection, fabric guard, VIN etching). Often $1-3k of pure dealer markup. Decline these — they're rarely worth the price and aren't included in the calc.
Frequently asked questions
Is my monthly payment the real cost of the car?▾
No. The monthly payment covers principal + interest. The actual cost of car ownership over 5 years includes depreciation (often $15-25k on a new car), maintenance ($3-5k), insurance ($8-15k), fuel/electricity ($10-15k), and taxes/registration ($1-3k). For a $40k new car at 6% APR, the 5-year TCO typically runs $100-130k of out-of-pocket cost. The payment is roughly 30-40% of that.
Should I lease or buy?▾
Lease if: (a) you keep cars 2-3 years, (b) your annual mileage is within 12-15k, (c) you value driving newer vehicles with full warranty, (d) you can deduct lease payments as business expense. Buy if: (a) you keep cars 5+ years, (b) your mileage exceeds 15k/year, (c) you want to build equity, (d) you don't mind handling maintenance after warranty. Run the calc at your specific numbers — the gap is rarely more than $3-5k over 3 years, but compounds dramatically over 5+ years.
What does APR with fees actually mean?▾
Reg Z (Truth in Lending Act) requires lenders to disclose APR including: interest rate + origination fees + closing costs (mortgages) + PMI. Two loans with the same interest rate but different fees will have different APRs. APR is the apples-to-apples comparison required by federal law specifically so you can compare offers without doing the math yourself.
How does depreciation work?▾
A new car typically loses ~20% of value in year 1 (the steepest drop), 15% in year 2, ~10% in year 3, then tapers to 6-8% annually. Cumulative: 45-50% lost in 3 years, 55-60% in 5 years. Used cars depreciate slower. The calc uses Edmunds/KBB blended curves — your actual model may deviate. Toyota Hilux/Tacoma depreciates among the slowest (~35% in 3 years); luxury sedans and out-of-warranty EVs depreciate the fastest.
What is "money factor" and how do I convert it to APR?▾
Money factor (MF) is how lease lenders quote interest rate. Formula: MF = APR_in_percent ÷ 2400, or equivalently APR_decimal ÷ 24. So MF 0.00208 ≈ 5% APR. Dealers prefer MF because the small decimal looks less alarming than 5%. Always convert before signing — the calc displays both side by side.
What is "underwater" or "negative equity" on a car?▾
When you owe more on the loan than the car is worth. Common when: (a) the loan term is longer than 60 months on a depreciating car, (b) you put little/nothing down, (c) you traded in another underwater car. Selling or trading while underwater means you have to pay the gap in cash or roll it into a new loan. Avoid by: keeping loan term ≤ 60 months, putting 20%+ down, choosing models with strong residuals.
Should I make extra principal payments on my auto loan?▾
Yes if your APR is above 5-6%. Math: every $1 extra goes 100% to principal, reducing future interest. On a $30k loan at 7% APR over 60 months, $100/month extra cuts total interest by ~$1,500 and pays off ~6 months early. Below 4% APR (super-prime credit), the math gets close — investment returns of 6-7% may beat extra principal payments. Above 6% APR, extra payments almost always win.
Should I buy new or used?▾
Used 2-3 years old captures the steepest depreciation drop while preserving most of the warranty. A 3-year-old car at 60-65% of MSRP gives you ~3-4 years of remaining warranty (most US warranties run 3-5 years/36-60k miles), and you skip the 30% depreciation hit of years 1-2. The trade-off: higher APR (used loans typically 1-2 points above new), and any maintenance issues are now your problem. For most buyers, 2-3 year old certified pre-owned (CPO) is the math-optimal choice.
How do trade-ins affect the loan?▾
If your trade-in is worth more than you owe (positive equity), the difference reduces the new loan principal — saving you interest and (in BR) IOF. If you're underwater, the gap typically rolls into the new loan, increasing the principal and starting you in negative equity on day 1. The calc detects underwater scenarios and surfaces a critical warning.
Can I refinance my auto loan?▾
Yes, if rates dropped or your credit improved. Refinancing makes sense when: (a) your current APR is 1+ point above current market rates, (b) you have at least 12-24 months left on the loan, (c) the new lender doesn't charge significant fees. Credit unions are typically the best refinance option — many offer no-fee refinancing with 0.5-1.5% rate reductions for borrowers with improved credit.
Sources & references
Cross-check every number in this calculator against the primary sources below.
- OfficialFederal Reserve — H.15 Selected Interest Rates (Auto Loan)In force: 2026
- OfficialCFPB — Truth in Lending Act / Regulation Z
- ReferenceBankrate — Auto loan rates by credit tier
- ReferenceEdmunds — True Cost to Own & Depreciation Data
- ReferenceKelley Blue Book — Lease Residual Values
- OfficialCFPB — Consumer Leasing Act (Regulation M)
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