Calculating Car Lease Payments
There are a lot of factors that influence the rates you pay on your car lease. And considering the fact that the lease payment formula is not usually revealed to the clients, you should still have an idea of the way you can calculate your car lease payments. Moreover, no details are listed on your contract and the federal regulations don’t require the disclosure of this information.
By calculating your car lease payments you will be able to verify the math used on your car lease contract and detect any possible inconsistencies. The lack of knowledge in the matter is usually the reason why many people pay more expensive rates than they should. That happens because, for example you won’t be able to make sure that the dealer will consider the negotiated price you established or if the value of your trade-in car was taken into account. Moreover, you will be able to keep under control the fees or extra charges the lease dealer might add and also make sure the interest rate is the one you would expect.
First of all, you should know the residual value which is usually a number expressed in percentages and multiply it by the car’s MSRP (Manufacturer’s Suggested Retail Price). The negotiated price will be used only at the next step which implies subtracting the residual value from the purchase price you negotiated with the dealer without taking into consideration the down payment. The result of this operation reflects the amount of depreciation the car will suffer during the lease period you agree upon.
The next step in calculating your car lease payments involves dividing the total depreciation amount by the number of months that form the term of the lease. You should know that the result will represent the first half of the monthly payment you will be obliged by contract to cover. This amount represents the money you will have to pay in order to cover the car’s depreciation while you lease it.
The fourth step involves the money factor that it’s given by the lease dealer. It is usually expressed as a decimal and it’s the same with the interest rate. So, as long as it’s low, the payment will be affordable. You should add the car’s negotiated price tag (minus the down payment) to the residual value of the leased car and then multiply it by the money factor. This result will represent the second half of the monthly payment on your car lease. The final step involves a simple add between the depreciation amount computed in a previous step and the result provided by the fourth step.
But you should keep in mind that the value computed doesn’t include sales tax. That sales tax is mandatory in many states and will increase the value of your monthly car lease payments. In order to take that into account as well you should apply the percentage of sales tax required by the state you lease the car from and add it to the monthly payment you computed in the fifth step. So, take into consideration this extra expense before facing the dealer.
So, after deciding the term of the lease and the annual mileage that will stated in the contract and influence the monthly payments you should take the time and do the math, just to be sure. There’s also the possibility to use a lease payment calculator that you can find online, but you will still have to know the some basic information in order to understand the data required from you and the significance of the results.
Post tags: Tags: Calculating Car Lease Payments, car lease, Car Lease Calculator