Budget Beavers

Car: Financing vs. Lease vs. Cash

True 5-year cost with depreciation, opportunity cost, and resale — not just the monthly payment.

For informational purposes only. Not financial advice. Provincial taxes on vehicle purchases (HST/PST/QST) vary by province and are not included — add ~13% in Ontario, ~12% in BC. Consult a financial advisor for personalized advice.

Vehicle

$
$
$
%

Running Costs (annual, applied equally to all options)

$ /yr 2025 · Source: IBC Canada
$ /yr
$ /yr

Assumptions

%/yr 2025 · Source: Canadian Black Book
%/yr
True 5-year cost winner
—
Enter your details above to compare
Finance
—
/mo avg
Lease
—
/mo avg
Cash
—
/mo avg
True cost breakdown
Component Finance Lease Cash
Calculate to see breakdown

True Cost Waterfall — The One Number Nobody Shows

Stacked bars show every dollar you'll spend (or forego) over the horizon. Green residual value shrinks the bar. Lowest total bar = true winner.

Depreciation Interest Insurance Fuel Maintenance Opp. cost −Residual value

The math behind your result

Every number on this page is derived from the exact Canadian regulatory formula — not approximations or estimates. The calculation runs entirely in your browser using the inputs you provided. Expand the section below to verify the math step-by-step, or share the URL to reproduce these exact results.

▶ How is this calculated?

Finance: PMT formula (monthly compounding)

payment = P × r × (1+r)^n / ((1+r)^n - 1)
where:
  P = loan principal = vehiclePrice − downPayment − tradeIn
  r = APR / 12   (NOT semi-annual — car loans are personal credit)
  n = loan term in months

NOTE: Canadian mortgage semi-annual compounding (Interest Act) does NOT apply
to car loans. Car loans are personal credit priced at APR/12.

Depreciation model (geometric)

value(year) = purchasePrice × (1 − annualDepreciation)^year

Example at 15%/yr:
  Year 0: $35,000
  Year 1: $29,750  (−15%)
  Year 3: $21,479  (−39% total)
  Year 5: $15,521  (−56% total)

Source: Canadian Black Book 2025 averages

True total cost formula

trueTotalCost = totalOutOfPocket + opportunityCost − residualValue

Finance: OOP = downPayment + (PMT × term) + (insurance + fuel + maint) × years
         OC  = downPayment × ((1 + oppRate)^years − 1)
         Residual = vehiclePrice × (1 − depRate)^years − remainingLoan

Lease:   OOP = downPayment + (leasePayment × leaseTerm) + running costs
         OC  = downPayment × ((1 + oppRate)^years − 1)
         Residual = $0  ← you return the car

Cash:    OOP = (vehiclePrice − tradeIn) + running costs
         OC  = (vehiclePrice − tradeIn) × ((1 + oppRate)^years − 1)
         Residual = vehiclePrice × (1 − depRate)^years

About the Car Financing vs Lease vs Cash Calculator

Why monthly payment comparisons are misleading

When you shop for a car, dealers quote monthly payments. Leasing almost always shows a lower monthly number than financing — but that's because you're renting, not owning. At the end of a lease, you have nothing. The true cost comparison has to account for what you get at the end: a car worth $15,000 if you financed, nothing if you leased.

What "opportunity cost" means in this context

Every dollar you put into a car is a dollar you didn't invest. If you pay $5,000 down and then invest 7%/yr for 5 years, that $5,000 grows to ~$7,013 — a gain of $2,013. By choosing to put it into a car instead, you've foregone that $2,013. For the cash buyer who spends $35,000 upfront, the opportunity cost is enormous (~$14,000 over 5 years). This is why cash isn't always the cheapest option when you have high-return alternatives.

Car loans use monthly compounding — not semi-annual

Canadian mortgages are required by the Interest Act to use semi-annual compounding. Car loans are different. They are personal credit products, and lenders quote an APR with monthly compounding (APR/12). Using mortgage-style semi-annual compounding on a car loan would produce a slightly different (wrong) answer.

Provincial taxes: why they're excluded

Vehicle purchases attract HST/PST/QST depending on province: Ontario (13% HST), British Columbia (12% PST+GST), Alberta (5% GST only), Quebec (14.975% QST+GST), etc. These taxes apply to the vehicle price and in some provinces to the down payment — the rules are complex and differ by purchase type (new vs used, private sale vs dealer). We exclude them here so the comparison is clean; add your province's applicable tax to the vehicle price for a real-world estimate.

Depreciation: Canadian Black Book averages

The 15%/yr geometric depreciation default is based on Canadian Black Book 2025 averages for a typical mid-size sedan or SUV. Some vehicles depreciate much faster (economy cars: 20–30%/yr in year 1) and some much slower (certain trucks, luxury SUVs with strong resale). Your actual residual value will vary significantly by make, model, trim, and mileage.

Not financial advice. This calculator provides estimates for informational and educational purposes only. Provincial taxes, dealer fees, extended warranties, and financing conditions vary. All calculations happen in your browser — no input data is sent to any server.

Related calculators