Buy | Lease | ||
---|---|---|---|

Price | CAR_PRICE | Price | CAR_PRICE |

Interest rate | INTEREST_RATE | Interest rate | LEASE_INTEREST |

Down payment | DOWN_PAYMENT | Down payment | DOWN_PAYMENT |

Other fees buy | OTHER_FEES_BUY | Other fees lease | OTHER_FEES_LEASE |

Rate of depreciation | RATE_OF_DEPRECIATION | Residual percent | RESIDUAL_PERCENT |

Sales tax | SALES_TAX | Security deposit | SECURITY_DEPOSIT |

Loan amount | LOAN_AMOUNT | ||

Loan payment | LOAN_PAYMENT | Lease payment | MONTHLY_PAYMENT |

Net cost of buying | Net cost of leasing | ||
---|---|---|---|

Total loan payments | + TOTAL_PAYMENTS | Total lease payments | + TOTAL_LEASE_PAYMENTS |

Lost interest on buy option | + LOST_INTEREST_ON_BUY | Lost interest on up front costs | + LOST_INTEREST_ON_LEASE |

Down payment | + DOWN_PAYMENT | Up front costs | + TOTAL_UPFRONT_COSTS |

Ending loan balance | + ENDING_LOAN_BALANCE | ||

Market value after TERM months* | - MARKET_VALUE_AT_END_OF_LOAN | ||

Net cost of purchase | = NET_COST_OF_PURCHASE | Net cost of lease | = NET_COST_OF_LEASE |

- Purchase price
- Total purchase price. Price should be after any manufacturer's rebate.
- Down payment
- Amount paid as a down payment, which for leases is often called a capital reduction.
- Sales tax rate
- Percentage sales tax to be charged on this purchase. Sales tax is included in each lease payment. Sales tax for buying is charged on the total sale amount.
- Investment rate of return
- Rate of return on investments. This is the return that you would make if you were to invest your down payment or security deposit instead of using it in your auto purchase or lease.
The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending Dec. 1st, 2014, had an annual compounded rate of return of 8.06%, including reinvestment of dividends. From January 1970 through to Dec. 2014, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.7% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that Separate Account investment funds and/or investment companies may charge.

- Loan term in months
- Term in months for your auto loan. Typically this is 36, 48, 60 or 72 months. If your loan term is longer than your lease term, we compare the buy vs lease options to the time the lease expires, and then use your remaining loan term to calculate your outstanding loan balance.
- Loan interest rate
- Annual interest rate for your loan.
- Other fees
- Any fee, other than a capital reduction or down payment, required to be paid at the time of purchase. This may include license, title transfer fees, etc.
- Annual depreciation
- The rate of depreciation gauges how fast your new automobile will lose its market value. A high depreciation rate is about 20% per year, medium is 15% per year and low is 10% per year.
- Market value of vehicle
- Value of your auto after the lease term is over.
- Net cost of buying
- This is the total cost of buying your vehicle. This is calculated as:
- + Total up front costs (down payment + other fees)
- + Lost interest
- + Outstanding loan balance at time lease expires
- - Market value of vehicle at time lease expires
- = Net cost of buying

The lost interest on your purchase includes any interest you would have earned at your investment rate of return on the buy option's down payment and other fees. If the monthly payment for leasing is less than the monthly payment for buying, this also includes any lost interest due to the higher monthly payments. If leasing is more expensive than buying, your interest costs for buying are reduced by the amount of interest you would earn on the difference.

- Lease term in months
- Term in months for your auto lease.
- Lease interest rate
- Annual interest rate for your lease.
- Other fees
- Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease. This may include license, title transfer fees, etc.
- Residual percent
- For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.
- Security deposit
- Refundable security deposit required at time of lease. We assume that the security deposit is fully refunded at the time the lease ends.
- Net cost of lease
- This is the total cost of leasing your vehicle. This is calculated as:
- + Total up front costs (capital reduction + other fees)
- + Total lease payments
- + Lost interest on lease
- = Net cost of lease

The lost interest on your lease includes any interest you would have earned at your investment rate of return on the lease option's down payment, security deposit and other fees. Please see the definition for 'Net cost of buying' for an explanation on how we account for any interest you might earn by having a lower monthly lease payment.

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Financial Calculators at http://www.dinkytown.net

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