Lease Payment – How To Calculate Them

Posted by on June 1, 2012 | No Comments

Making it easier for you to make an informed decision is understand how to calculate your monthly lease payment. But shying away from the complicated math on our lease contract is what most of do and so we leave it up to the dealer to do the payment formula.

The truth is, it’s not that difficult. Everything else will fall into place once you understand all the figures that are involved in calculating your monthly payments. The key figures include:

MSRP or the Manufacturer’s Suggested Retail Price: This refers to the list price of the vehicle or the window sticker price.

The Money Factor: This is the factor that determines the interest rate on your list. Insist that your dealer discloses this rate before entering into a lease.

What is a Lease Term? The number of months the dealer rents the vehicle.

What is the Residual Value? The value of the vehicle at the end of the lease. Again, you can get this figure from the dealer.

Now we have to calculate a sample lease payment that is based on a vehicle that has a money factor of 0.0034 (this is usually quoted as 3.4%) and an MSRP or sticker price value of $25,000. Base it on the scheduled lease that is over 3 years with an estimated residual percentage of 55%.

The first step is to calculate the residual value of the car. What you do is multiply the MSRP by the residual percentage:

For example: $25,000 X .55 = $13 750.

The car will be worth $13,750 at the end of the lease, so you’ll be using:

Formula: $20,000 – $13,750 = $11,250

The amount of $11,250 will be used over a 36 month lease period so you will have a monthly payment of:

Monthly payment: $11,250 / 36 = $312.50.

The monthly depreciation payment is what the first part of the monthly payment is called.

The second part of the monthly payment, called the money factor payment, factors the interest charge. To calculate this, you need to add the MSRP figure to the residual value and multiply this by the money factor:

For instance: ($25,000 + $13,750) * 0.0034 = $131.75

Finally, we get the approximate monthly payment by adding the two figures together:

For example: $312.50 + $131.75 = $444.25

Your monthly payments for the 36 months of the lease will be around $444.25

Don’t forget that this is a simplified calculation which means that taxes, fees, rebates, or any other incentives will not be taken into account. You will be given a ballpark figure with this calculation or a rough idea of what your lease payments for the vehicle in question should be.

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