How To Calculate Your Car Lease Payment

Many car dealers will make every effort to move your thoughts from the purchase price and to the lease payments.

How to calculate your car lease payment. Your monthly lease payment is the payment you have been paying throughout the life of your lease. High interest rates equate to high monthly repayments. When you lease a car you re paying for the depreciation that occurs from your use of the vehicle. When you lease a car your interest payments are calculated as a percentage of the depreciation of the vehicle the decrease in your car s value. Monthly lease payments can be severely impacted by interest rates so it is vital to consider interest rates before signing a lease agreement.

To best explain the calculation steps we are going to create a sample lease. Use this auto lease calculator to estimate what your car lease will really cost. An extra charge may be imposed at the end of the lease term if your liability if any is based on the difference between the residual value of the automobile and its realized value at the end of the lease term. For our example we are going to lease a car with an msrp of 23 000. Let s imagine that a particular car has an msrp of 35 000.

Before you decide to lease a car you should calculate your monthly expenses and check if your lease payments have any impact on utility bills. Put some money aside for emergencies. Find your monthly lease payment. The manufacturer has set a residual of 60 i e 21 000 for a 36 month. For example other fees may be imposed in addition to the down payment and a security deposit may be required.

Next determine the residual value of the car at the end of the lease by multiplying the sticker price of the car by the percentage to find the residual value. You can find this amount on your lease bills. If your vehicle depreciates 10 000 over a three year lease and your interest rate is 5 you ll be paying 13 88 a month in interest on a consistent monthly basis. To calculate a lease payment start by calculating the net capitalized cost which is the negotiated selling price minus any down payment or other credits like a trade in. Enter the car s msrp final negotiated price down payment sales tax length of the lease new car lending rate.

If you have not yet gotten the lease. The money factor is sometimes used by car dealerships to calculate the monthly interest owed. This can be rearranged to solve for the payment pmt pmt pv x i 1 1 1 i n if we treat the present value pv as the asset value to be financed at the start of period 1 a the discount rate i as the lease interest rate and n as the number of lease payments required under the agreement then the leasing calculation formula can be restated as follows. You can calculate your monthly lease payment by adding the vehicle s monthly depreciation plus the monthly finance charge.