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Smart Shopper How Do I Calculate Monthly Lease Payments?
200 messages, Last post on Nov 02, 2009 at 6:41 AM
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For some reason my original post that explained how to calculate monthly lease payments seems to have disappeared in our transition to the new Town Hall software. Given this topic's popularity and numerous requests to bring it back, I have decided to create a new discussion on the subject. How to Calculate Monthly Lease Payments Step 1: Calculate the Capitalized Cost To calculate a vehicle's capitalized cost, take its selling price subtract your down payment. Step 2: Calculate Your Vehicle's Residual Value To calculate your vehicle's residual value, multiply its full MSRP (note some banks will only allow consumers to residualize certain options or will place a cap on the amount of money that can be residualized for each option) times its residual value percentage. The residual value percentage is determined by the bank that you are leasing through. Step 3: Determine Your Vehicle's Total Depreciation To determine your vehicle's depreciaiotn, subract its residual value from your capitalized cost. Step 4: Determine Your Vehicle's Monthly Depreciation To figure out your car or truck's monthly depreciation, divide the total depreciation that you just calculated by the number of months that you are going to lease it for. Step 5: Determine Interest Charges To determine the interest portion of your monthly lease payment add your vehicle's capitalized cost and its residual value and then multiply the result times your bank's lease money factor. Step 6: Calculate Monthly Payment Finally, add the results from Step 4 (the monthly depreciation) and Step 5 (the monthly interest charge) to come up with your pre-tax monthly lease payment. Car_Man Host Smart Shoppers / FWI Message Boards
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Replying to: Car_man (Jun 28, 2001 3:15 pm) You rock. this saved me a few grand. And to show my appreciation I put an excel spreadsheet together to do perform this calcualtion. Anyone who emails me, can have it for free. Never let the dealer figure out your lease payment - when you udnerstand how it works and can do this yourself- it will save you THOUSANDS!!
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Replying to: golic (Feb 26, 2006 7:43 am) Could you shoot me a copy of that spread sheet too, please? I've never leased a car before, but am considering it now. In general terms, it seems that if the lease is a good deal, then probably it has a high residual which would make buying it at the end of the lease a bad deal. But with a low residual, then buying it at the end might make more sense. Is that a correct interpretation of the overall principle? I'm not sure it's for me, I usually keep my cars a long time, but maybe a lease plus a buy at the end *might* make sense, depending how numbers work out.
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Its on its way, feel free to email back if you have questions. |
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Replying to: biancar (Feb 27, 2006 10:07 pm) You will always have the option at the end of the lease to buy the vehicle at a stated price that will not change. When you lease the vehicle the finance company estimates the value of the vehicle at the end of the lease. Take my Pilot, full MSRP was 33,600. With my 36/15K lease the value will be 18,480. If the pilot holds it value and lets say it is worth $20,000, I can buy that vehicle for only $18,480 OR I can buy the vehicle for $18,480, then trade it in on my new vehicle and put $1,520 in my pocket PLUS save sales taxes on the trade in. If at the end of the lease the Pilot is only worth 17K, I just give it to the dealer and walk away. IMO, leasing should not be done unless you running the car through a business or you simply must have a new car every 3 years and you can keep it in good shape and meet the milage requirements. YMMV
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Replying to: golic (Feb 28, 2006 9:16 am) The guy that was right side up had a Very sharp 4wd Toyota Tacoma extended cab manual transmission which I think was a 1999. It had close to a 100,000 miles and was still worth over 10,000 dollars on a trade. He owed 9,300 though because he leased first then bought out the lease.
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Replying to: british_rover (Feb 28, 2006 9:24 am) We ended up with a new Ody and did the buy/trade-in at the dealership. In all honesty, I have considered this my once in a lifetime lease victory.
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Replying to: golic (Feb 28, 2006 9:30 am)
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Replying to: british_rover (Feb 28, 2006 9:32 am) -Brian
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