Cost Of A Car Lease

Leasing a car is a lot simpler than purchasing one, or is it? Most people tend to believe that but in truth, things are a bit different, getting a car through a lease might bring more problems than actually purchasing a car. The most common mistake is encountered when an inexperienced buyer comes to the dealership unprepared, and leasing the first car he sees. Most dealers will surely promise even the moon from the sky as long as someone leases the car. The price is the biggest enemy here since car payments are directly related to the price of the car. Therefore, you as a prospective lessee need to be able to calculate car lease rates on your own. This is probably the most important research factor involving car leasing.

Naturally you cannot expect to calculate a lease payment to the last penny. That would be virtually impossible. Not even dealerships are able to give the exact price on the lease. The amount of money you have to pay comes as a result of their estimative calculations on the car’s depreciation and the amount of money charged as “interest”.

You can calculate the approximate lease rates by getting a few parameters “out of the hat”. Let’s assume that you’ve manage to get a “bottom line lease” which is considered the best deal you can get. The bottom line lease usually means that, due to your credit score and history, you get the best deal they can offer, which means that each month you would be saving up to $30 compared to a “normal” lease. Go figure that in 36 months 30 bucks can mean a lot of savings each month.

In order to calculate the bottom line lease you will be required some figures.

The MSRP or the car’s value can easily be determined from Edmunds TMV System. They have daily updated databases that will provide the most accurate price for each new car on the market.

The money factor. This is the interest rate charged by the leasing company, and represents the basis of the lease. This info can easily be acquired from the dealer or the closest credit union.

The Lease term is the amount of time you want to use the car.

The Residual Value of the car, which represent the “used car” value the vehicle will have after 36 months of use.

The simplest solution is to use an online lease calculator available online. One of the most accurate lease calculators can be found at http://www.edmunds.com/calculators/car-lease.html. This is one of the most complex and user friendly calculators online since it works with the Edmunds TMV System. Because of the system’s design it doesn’t follow the prices placed by dealers. It also locks on to all the sales thus providing the necessary parameters in order to provide accurate prices and lease deals.

In order to use the system, all you need to do is provide pertinent information about the lease such as the zip code, so that the system can lock on to your area, the price of the vehicle and so on. In case you have a trade in, it can also determine and calculate the used market value of the used car. And finally the lease term (the amount of time you wish to keep the car), the lease residual value, and the mileage program you have chosen. The system will automatically calculate the rates taking all the parameters into account. Despite the fact that the result comes in a matter of seconds, the math behind it is quite tricky.

You might also want to read:

Post tags: Tags: automotive articles, cost of a car lease