| Understanding how to calculate your monthly lease | | | | This amount of $9,000 will be used over a 36 month |
| payment makes it easier for you to make an informed | | | | lease period giving us a monthly payment of: |
| decision. Yet, most of us shy away from the | | | | $9,000 / 36 = $250. |
| complicated math on our lease contract, leaving it up to | | | | This is the first part of the monthly payment, called the |
| the dealer to do the payment formula. | | | | monthly depreciation charge. The second part of the |
| Actually, its not that difficult! Once you understand all | | | | monthly payment, called the money factor payment, |
| the figures involved in calculating your monthly | | | | factors the interest charge. It is calculated by adding |
| payments, everything else falls into place. These key | | | | the MSRP figure to the residual value and multiplying |
| figures are: | | | | this by the money factor: |
| MSRP (short for Manufacturers Suggested Retail | | | | ($20,000 + $11,000) * 0.0034 = $105.4 |
| Price): This is the list price of the vehicle or the window | | | | Finally, we get the approximate monthly payment by |
| sticker price. Money Factor: This determines the | | | | adding the two figures together: |
| interest rate on your lease. Insist on your dealer to | | | | $250 + $105.4 = $355.4 |
| disclose this rate before entering into a lease. Lease | | | | To recapitulate, the sample formula looks like this: |
| Term: The number of months the dealer rents the | | | | 1- Monthly Depreciation Charge: |
| vehicle. Residual Value: The value of the vehicle at the | | | | MSRP X Depreciation Percentage = Residual Value |
| end of the lease. Again, you can get this figure from | | | | MSRP Residual Value = Depreciation over lease term |
| the dealer. | | | | Depreciation over lease term / lease term (number of |
| Now, let us calculate a sample lease payment based | | | | months in the lease) = monthly depreciation charge |
| on a vehicle with an MSRP (sticker price) value of | | | | 2- Monthly factor money charge |
| $25,000 and a money factor of 0.0034 (this is usually | | | | (MSRP + Residual value) X Money factor = money |
| quoted as 3.4%). The scheduled-lease is over 3 years | | | | factor payment |
| and the estimated residual percentage is 55%. | | | | 3- Sample Monthly Payment:depreciation charge + |
| The first step is to calculate the residual value of the | | | | money factor payment = monthly payment |
| car. You multiply the MSRP by the residual percentage: | | | | Keep in mind that this is a simplified calculation that |
| $20,000 X .55 = $11,000. | | | | does not take into account taxes, fees, rebates or any |
| The car will be worth $13,750 at the end of the lease, | | | | other incentives. The calculation gives you a ballpark |
| so you'll be using: | | | | figure or a rough idea of what your lease payments |
| $20,000 $11,000 = $9,000 | | | | for the vehicle in question should be. |