2018 Tax Law Auto Lease V Buy Calculator

Deciding between leasing or buying a car can be complex, especially with the tax implications of the 2018 tax law. This calculator helps you compare the financial benefits of each option, considering depreciation, tax deductions, and other factors.

How to Use This Calculator

Enter your vehicle details, financial information, and tax preferences to see which option is more beneficial for you. The calculator will show you the total cost of each option, including taxes, depreciation, and other factors.

Important Notes

This calculator provides estimates based on the 2018 tax law. Actual results may vary depending on your specific circumstances and local tax laws. Always consult with a tax professional for personalized advice.

Key Concepts in Auto Lease vs Buy

Understanding the key differences between leasing and buying a car is essential for making an informed decision.

Leasing a Car

Leasing involves paying monthly payments for a set period, typically 2-4 years. At the end of the lease, you can return the car, lease a new one, or buy it.

Buying a Car

Buying a car involves taking out a loan to finance the purchase. You own the car outright after paying off the loan, but you're responsible for maintenance, insurance, and depreciation.

Depreciation Formula

Depreciation is calculated using the straight-line method: Annual Depreciation = (Purchase Price - Salvage Value) / Useful Life

Tax Implications of 2018 Law

The 2018 tax law introduced several changes that affect how you can deduct auto expenses. Here are the key points to consider:

Standard Mileage Rate: The standard mileage rate for business use increased from 54.5 cents to 57.5 cents per mile in 2018.
Bonus Depreciation: The bonus depreciation rule allowed businesses to deduct 100% of the cost of new or used business property placed in service in 2018.
Section 179 Expensing: The limit for Section 179 expensing increased from $500,000 to $1 million in 2018.

Tax Deduction Limits

Remember that tax laws can change annually, and the information provided here is based on the 2018 tax law. Always verify the current tax laws and regulations with a tax professional.

Lease vs Buy Comparison Table

This table provides a quick comparison of the key factors to consider when deciding between leasing or buying a car.

Factor	Lease	Buy
Ownership	No	Yes
Monthly Payment	Lower	Higher
Upfront Cost	Lower	Higher
Depreciation	Less	More
Tax Deductions	Limited	More Available

Worked Example

Let's look at a practical example to illustrate how the calculator works.

Scenario

You're considering leasing or buying a $30,000 car with a 5-year term. The lease payment is $450 per month, and the buy payment is $500 per month with a $5,000 down payment.

Calculations

Using the calculator, you can see that leasing the car would cost you $27,000 over 5 years, while buying the car would cost you $30,000 over the same period. The difference is due to the lower monthly payment and no down payment required for leasing.

Example Results

Lease Total: $27,000
Buy Total: $30,000
Difference: $3,000

Frequently Asked Questions

What is the difference between leasing and buying a car?

Leasing involves paying monthly payments for a set period, typically 2-4 years, and you do not own the car. Buying a car involves taking out a loan to finance the purchase, and you own the car outright after paying off the loan.

How does the 2018 tax law affect auto leases and purchases?

The 2018 tax law introduced changes such as the standard mileage rate increase, bonus depreciation, and increased Section 179 expensing limits, which can affect how you can deduct auto expenses.

Which option is better for me, leasing or buying?

The better option depends on your financial situation, driving habits, and long-term plans. Use this calculator to compare the costs and benefits of each option.