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 = resale value − remaining loan balance, and every view credits equity, never raw resale value — if the horizon ends before the loan does, the balance still owing is subtracted (an underwater car is worth its equity, not its sticker). 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.
Common questions
Is it cheaper to lease or finance a car in Canada?
Over a single lease term, leasing usually has the lower cash outlay because you only pay for the depreciation you use plus a finance charge, and sales tax applies only to each monthly payment rather than the full price. Over a longer ownership horizon, financing almost always wins because you eventually own an asset and stop making payments, while a leaser keeps signing new leases forever. This calculator shows both views.
How is a Canadian lease payment calculated?
A lease payment has two parts: depreciation = (net capitalized cost minus residual value) divided by the term in months, and a finance (rent) charge = (net cap cost plus residual) times the money factor, where the money factor equals the APR divided by 2400. Provincial sales tax (GST/HST/PST) is then added to each monthly payment, not to the whole car price.
Do you pay sales tax on a leased car in Canada?
Yes, but only on each monthly lease payment, not the full vehicle price. When you finance a purchase you pay tax on the entire price up front (usually rolled into the loan). Spreading the tax over the lease payments is one reason lease cash flow looks lower, but you never stop paying it because you never own the car.
What is a money factor and how does it relate to APR?
The money factor is how lease interest is quoted. Multiply it by 2400 to get the equivalent annual interest rate: a money factor of 0.00208 is roughly a 5% APR. Dealers sometimes quote the money factor instead of the rate, so always convert it back.
Can I deduct a car lease if I'm self-employed in Canada?
If you use the vehicle for business, the CRA lets you deduct eligible lease costs up to a monthly cap (about $1,100 plus tax as of 2026, prorated for business use). A financed purchase is instead deducted through Capital Cost Allowance on Class 10/10.1 with a cost ceiling near $38,000. Leasing can give a larger, simpler deduction for expensive vehicles; confirm the current limits with the CRA.