Last post on Dec 12, 2013 at 6:24 AM
You are in the Prices Paid - Buying & Leasing Experiences
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Honda Accord, Car Leasing, Coupe, Sedan
#5437 of 5566 Re: Lease cost calculation [gmanusmc]
Aug 21, 2013 (4:11 pm)
Many thanks for your highly valued service to our country! May God Bless you and yours.
#5438 of 5566 Re: Residual Value calculation [delta737h]
by kyfdx@Edmunds HOST
Aug 21, 2013 (7:15 pm)
Thanks.. I get a little practice...
#5439 of 5566 Re: Lease cost calculation [delta737h]
Aug 21, 2013 (9:54 pm)
Thanks John - and thank you for educating me on the more intricate mechanics of the accounting used to calculate the cost of a lease. I know you recognized what I was getting at (you obviously hear it a lot). I was trying to make the point that it might cost more in the end if, at lease end, the residual is financed at a used car interest rate rather than just doing a conventional finance right from the start at 0.9 or 1.9. I just stated it poorly.
Anyway, thanks for your help and I will be sure to check out your site in detail over the next few days.
Take care, Bill
#5440 of 5566 Re: Lease cost calculation [gmanusmc]
Aug 22, 2013 (1:31 am)
Thanks Bill. If you have any questions or suggestions for how my site can be improved, please let me know.
All the Best,
#5441 of 5566 Re: Residual Value calculation [kyfdx@Edmunds]
Aug 22, 2013 (2:51 pm)
Thanks for the info kyfdx - between you and John, I see that auto lease amortization is a bit more complicated than the simple formula we all know and love. Using the formula you and John provided, I still come out with the same figure I had for the monthly lease cost so I guess all is good. I have been doing some looking and haven't come across a program or spreadsheet that calculates the detailed amortization. It's not critical to getting a good lease deal but it would be one of those nice to have things to have all the details at your fingertips. Again, thanks for your help.
#5444 of 5566 Re: Residual Value calculation [gmanusmc]
by kyfdx@Edmunds HOST
Aug 22, 2013 (3:06 pm)
Well.. a lease always has a straight-line amortization, unlike a loan..
When you calculate the monthly finance charge, that's not an average of all months, but the same every single month...
So... if the CAP cost is $36K and the residual is $18K on a 36 month lease, then the lease balance will drop exactly $500, each month... And, the finance portion of the lease will be calculated on an average of the CAP + Residual.. so, finance charges apply to $27K, each month, regardless of current lease balance (in this example).
Hope that helps a little..
#5446 of 5566 Re: Residual Value calculation [kyfdx@Edmunds]
Aug 22, 2013 (8:51 pm)
You see - that's what I thought and that's one reason this whole discussion started - my perception of a simplified formula that included the residual led me to believe there is interest charged on the residual. John's spreadsheet indicates differently. It shows amortization similar to a home mortgage where the interest is greater and the reduction of the remaining balance smaller at the beginning of the lease. A monthly interest charge is applied to a continually decreasing lease balance until the end of the lease term leaving only the residual as the remaining balance. I've never had a reason to look beyond the old mf(cap cost + res) formula so this is all new to me. And after looking at John's background and website, I've been enlightened.