Cash, installments or leasing: compare car costs over 60 months

Compare cash, installment finance and leasing over the same 60 months with the same vehicle and disposal assumptions. This hypothetical example produces KRW 34,000,000 for cash, about KRW 40,398,724 for installments and KRW 48,000,000 for a return-at-end lease. These are not market quotes.

Does a lower monthly payment mean a cheaper car?

No. A large deposit or advance payment can make the monthly figure look small. Returning a leased car is also different from selling a car you purchased. Record money paid at the beginning, throughout the term and returned at the end.

This is a pretax personal cash-flow comparison under Korean contracts. Check ownership, registration and security arrangements in each contract. A lease should not be assumed identical to a rental product. The Credit Finance Association's lease and installment product guide explains the product structures and differences between lease types.

Fix the assumptions first

The invented vehicle price is KRW 50,000,000. Acquisition and registration costs for purchases are assumed to total KRW 4,000,000; this is a placeholder for a written quote, not a calculation of tax liability. The assumed sale proceeds after 60 months are KRW 20,000,000, not a resale forecast or guarantee.

Installments use a KRW 10,000,000 down payment and KRW 40,000,000 loan at 6% annually over 60 equal monthly principal-and-interest payments. There is no early repayment or separate finance fee in this example. The lease has a KRW 15,000,000 refundable deposit and 60 payments of KRW 800,000. The car is returned and the deposit refunded in full at the end. Acquisition and registration costs are assumed reflected in lease payments, with no separate initial fee.

Insurance, annual vehicle tax, fuel, maintenance and parking are assumed identical separate expenses and excluded from every column. If a real lease includes some of them, normalize the scope before comparing. The table also excludes interest earned on cash, inflation and business tax effects.

Calculate the 60-month cost

Cash purchase costs 50,000,000 + 4,000,000 - 20,000,000 = KRW 34,000,000. For installments, the monthly rate is 0.06 / 12 = 0.005. The payment formula is principal × monthly rate / [1 - (1 + monthly rate)^(-number of months)].

The KRW 40,000,000 loan produces approximately KRW 773,312.06 monthly, KRW 46,398,723.67 total payments and KRW 6,398,723.67 total interest. Net installment cost is 10,000,000 + 4,000,000 + 46,398,723.67 - 20,000,000 = about KRW 40,398,724. A lender's won rounding and final-payment adjustment can create small differences.

The refundable deposit ties up cash but cancels out of nominal net outflow under the full-refund assumption. Prepaid rent is different and must not be treated as refundable. Check potential deductions for damage, excess mileage and unpaid charges.

Practical insight: test the assumptions, not just the ranking

Here the installment purchase costs about KRW 6,398,724 more than cash, exactly the financing interest, because vehicle price, acquisition costs and sale proceeds match. If resale falls to KRW 15,000,000, both purchase methods become KRW 5,000,000 more expensive: KRW 39,000,000 and about KRW 45,398,724. The assumed return-at-end lease does not directly use that resale figure, but return-condition charges remain possible.

After asking about the monthly payment, ask what happens to the car and deposit after month 60. If you may change cars early, obtain a separate settlement quote for termination at month 24. Multiplying the normal monthly payment by 24 does not calculate an early termination bill. Paying cash may be cheaper but can leave inadequate emergency funds. Conversely, uncertain investment returns do not establish that borrowing is the better choice.

Before signing: frequently asked questions

Q. Can a business deduct all lease payments?

Not automatically. Business use, documentation, vehicle type and tax limits require separate assessment. No tax saving is included in this table.

Q. Is the KRW 15,000,000 deposit a cost?

A full refund cancels it from nominal net outflow, but it remains unavailable cash during the term. Check deductions and refund timing. Do not confuse it with prepaid rent.

Q. Is cash always cheapest?

Only in this example. Discounts, actual rates, lease terms and resale proceeds can change the outcome. Compare written quotes obtained on the same date.

Q. What if you buy the car at lease maturity?

Add the purchase-option price and transfer costs. If you still own the car at the comparison date, account for its remaining asset value consistently.

Q. Why might the lender's payment differ slightly?

Payment dates, rounding, fees, grace periods and the final installment can differ. Compare the lender's complete repayment schedule.

Q. Can early termination be estimated with one fixed percentage?

Terms and settlement components vary. Ask for a quote for the intended termination date. The association's standard terms resources include automobile lease terms.