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