Car Loan vs Lease Calculator
Finance or lease your next vehicle? This does the Canadian math the dealer glosses over — sales tax on the full price versus each payment, real money-factor lease payments, the equity you build, kilometre penalties, and what happens if you lease then buy it out.
Net cost, side by side
What each option really costs over the lease term, after subtracting the equity you'd own.
Cumulative cost over the ownership horizon
Buy-and-hold vs lease-then-buy-out: cash paid so far minus what the car is worth, year by year.
Lease-term breakdown
Every dollar in each option over the lease term. Values in parentheses are worth returned to you.
| Line item | Loan (buy) | Lease |
|---|
How this is calculated
The loan side
Sales tax is charged on the full price when you buy: tax = price × rate. The amount financed is price + tax − down payment, and the monthly payment is the standard amortization P × r ÷ (1 − (1+r)^−n) with r = APR ÷ 1200 and n = term in months. Car loans compound monthly (unlike Canadian mortgages), so no semi-annual adjustment applies.
The lease side (money factor)
A lease payment is depreciation plus a rent charge. Depreciation = (net cap cost − residual) ÷ months. The rent charge = (net cap cost + residual) × money factor, where the money factor = APR ÷ 2400. That "2400" is the whole trick: the finance charge is applied to the sum of what you owe now and the residual, so dividing by 2400 (not 1200) gives the correct rate. Then provincial sales tax is added to each payment — payment × (1 + rate) — not to the full car price.
Sales tax, the Canadian way
This is the factor most calculators miss. Buying: you pay tax on the entire price once (usually rolled into the loan). Leasing: you pay tax only on each monthly payment. Spreading it out lowers lease cash flow — but you pay it forever because you never own the car. Rates used (as of July 2026): ON 13% and NB/PE/NL 15% HST, BC/MB 12%, SK 11%, QC 14.975%, NS 14%, and AB plus the territories 5% GST. Private used-car sales are taxed differently (e.g. BC's tiered PST, ON's 13% on the greater of price or wholesale value) — those aren't modelled here.
Equity, depreciation & the horizon
The car's resale value follows an editable curve: −year 1% the first year, then −later% compounding each year after. Equity at the end of the lease term = resale value − remaining loan balance. The lease-term view favours leasing (lower cash out); the ownership-horizon view is fairer to buying because it counts the payment-free years after the loan is paid off. The lease-then-buy scenario finances the residual (plus its tax) at your loan rate over the remaining months, so you can compare true cost of ownership.
Kilometres & the lease penalty
If you drive more than the lease allowance, the excess is charged at the per-km rate at lease end: (your km − allowed km) × $/km. Buying has no such cap. The insurance premium and acquisition/disposition fees ($595 / $395 assumed) are applied to the lease side only.
Business use
If you're self-employed, the CRA caps lease deductions (~$1,100/mo + tax, 2026) while a purchase is written off through Capital Cost Allowance on a Class 10/10.1 cost ceiling near $38,000. For pricey vehicles leasing can yield a bigger deduction — see the HST for self-employed and business loan tools.
What this doesn't model
Manufacturer cash incentives or subvented ("teaser") lease rates, trade-in tax credits, GAP insurance, early lease-termination penalties, the opportunity cost of a down payment invested elsewhere, and provincial luxury-vehicle taxes. Also see student loan and debt consolidation for other borrowing decisions.