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Lease Payment Formula:
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A car lease payment consists of two main components: depreciation (the car's value loss during the lease) and finance charge (the cost of borrowing the money to lease the car). The payment is calculated based on the capitalized cost, residual value, lease term, and money factor.
The calculator uses the standard lease payment formula:
Where:
Explanation: The first part calculates monthly depreciation, while the second part calculates the finance charge. The sum of these two gives the monthly payment.
Details: Understanding lease payments helps consumers compare lease offers, negotiate better terms, and budget for vehicle expenses. It reveals the true cost of leasing beyond just the monthly payment amount.
Tips: Enter all values in USD. The money factor is typically provided by the dealer (divide the APR by 2400 to convert to money factor). Residual value is often expressed as a percentage of MSRP.
Q1: What's a good money factor?
A: Money factors typically range from 0.0010 to 0.0040. Lower is better (equivalent to 2.4%-9.6% APR).
Q2: How is residual value determined?
A: The leasing company estimates the car's future value based on make, model, term, and mileage allowance.
Q3: What's included in capitalized cost?
A: Negotiated vehicle price plus any fees or add-ons you choose to finance in the lease.
Q4: Are there other lease fees?
A: Yes, most leases have acquisition fees, disposition fees, and possibly security deposits not included in this calculation.
Q5: How can I lower my lease payment?
A: Negotiate a lower cap cost, choose a car with higher residual value, extend the lease term, or improve your credit score for a better money factor.