Car Financing: Loan vs. Leasing Costs Differ by NIS 2,663 Over Five Years
A new car calculator reveals a NIS 2,663 difference over five years for a NIS 150,000 family car, comparing a loan with a residual value sale versus private operational leasing. The loan option requires a NIS 30,000 down payment, a NIS 120,000 loan at 8.5% annual interest over 60 months, and selling the car at the end. The leasing option costs NIS 2,450 per month. The loan's total repayment, including NIS 27,719 in interest, amounts to NIS 147,719, or NIS 2,462 monthly. This calculation excludes running costs like insurance, maintenance, and licensing, totaling NIS 49,500 over five years. The car's residual value after five years, assuming a 15% annual depreciation, is NIS 66,556, making the total ownership cost NIS 160,663, or NIS 2,678 monthly. The leasing cost, including NIS 11,000 for exceeding the mileage limit (4,000 km annually at NIS 0.55 per km), is NIS 158,000, or NIS 2,633 monthly.
The depreciation rate significantly impacts the ownership cost. A 12% annual depreciation makes the car worth NIS 79,160, reducing ownership costs by NIS 9,941 compared to leasing. Conversely, an 18% depreciation leaves the car valued at NIS 55,611, making ownership NIS 13,608 more expensive than leasing. Popular models retain value better, while outdated ones depreciate faster.
Other factors influencing the decision include the opportunity cost of the down payment, which could have earned returns elsewhere. Insurance premiums also differ; they decrease annually with ownership but remain fixed in leasing. Early termination penalties also vary, with leasing contracts often involving significant fees or retroactive rate adjustments, while ownership involves selling the car and settling the loan, potentially with early repayment fees.
Leasing with a purchase option at the end of the term presents a different calculation, with lower monthly payments but a large, predetermined final payment. Buyers intending to exercise this option should compare the predetermined price against the expected market value, which is directly related to the depreciation rate.