Calculator Inputs
Example Data Table
Sample comparison rows you can replicate with this calculator.
| Scenario | Lease: Monthly | Lease: Term | Purchase: Net upfront | Discount rate | Likely winner |
|---|---|---|---|---|---|
| Starter home backup | 185 | 5y | 7,250 | 10% | Depends on residual |
| High incentives region | 210 | 6y | 5,900 | 9% | Purchase often leads |
| Short stay property | 160 | 3y | 7,800 | 12% | Lease often leads |
Formula Used
- Nominal total cost sums all cash payments without discounting.
- Discounted total (NPV) discounts each cash flow to today:
NPV = Σ CFt / (1+r)t. - Monthly discount rate converts annual rate:
rm = (1+r)1/12 − 1. - Loan payment uses:
PMT = r·PV / (1 − (1+r)−n). - Equivalent monthly (NPV) converts NPV into a level monthly cost over the horizon.
How to Use This Calculator
- Enter the lease term, monthly payment, fees, and escalation.
- Enter purchase price, installation, incentives, and expected resale value.
- Choose whether the purchase is financed, then fill loan terms.
- Set a discount rate that matches your required return.
- Press Submit to view results above the form.
- Use Download CSV or Download PDF for a clean report.
Cost structure overview
Leasing concentrates cost into periodic payments, while ownership concentrates cost upfront. Using the sample inputs, a 5 year lease at 185 per month, 2.5% annual escalation, 450 upfront, 12 service, 60 annual maintenance, and a 900 buyout yields roughly 13,000 nominal cost. The purchase sample uses 7,800 price plus 650 install, less 1,200 incentives, 40 annual maintenance, and 2,500 resale value.
Discount rate and time value
Discounting converts future cash flows into present value. The calculator uses an effective monthly rate r_m = (1+r)^(1/12) - 1 and discounts each month t by 1/(1+r_m)^t. At 10% annual discount, a cash flow in month 60 is worth about 0.61 today. Higher rates favor later payments and penalize upfront spending.
Escalation and service fees
Escalation compounds annually, so 185 becomes about 209 by year five with 2.5% escalation. Service adders are modeled monthly and are not escalated unless you fold them into the base payment. A 12 monthly service fee adds 720 over five years before discounting, so small adders can change the winner.
Financing versus cash purchase
When financing is enabled, the model uses PMT = r*PV /(1 - (1+r)^-n). Financing 90% of a 7,250 net upfront at 8.5% APR over 60 months produces a payment near 149 per month. Financing lowers day one cash, but total nominal cost rises when APR exceeds your discount rate. Run scenarios with different horizons to match your expected tenure.
Residual value and decision signal
Residual value is treated as a credit at the end of the horizon. Increasing resale from 2,500 to 3,500 reduces purchase NPV by the discounted amount, about 2,100 at 10% over five years. Compare NPVs and equivalent monthly cost; the lower NPV is the cheaper path under your assumptions.
FAQs
1) What does the discounted total represent?
It is the net present value of all modeled cash flows, discounted monthly using your annual discount rate converted to an effective monthly rate.
2) How is lease escalation applied?
The base lease payment escalates once per year. Each month uses the payment level for its year index, then adds any monthly service fee.
3) Why can a higher discount rate favor leasing?
Higher discount rates reduce the present value of later payments. Because leasing spreads costs over time, discounting can make it look cheaper than paying upfront.
4) How is loan financing modeled?
A standard level-payment loan is calculated from APR and term, then monthly payments are discounted using your discount rate for NPV comparisons.
5) How should I estimate resale value?
Use a conservative expected market value at the end of your analysis horizon. Residual is treated as a credit that reduces purchase cost.
6) Which result should I trust most?
Use NPV to compare financial cost under your discount rate. Use equivalent monthly cost to communicate the result as an easy monthly number.