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Smart Shopper General Questions about Leasing Vehicles
284 messages, Last post on Aug 01, 2009 at 9:50 AM
You are in the Smart Shopper Forum. Your Hosts are kirstie_h & tidester
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can anyone help me calculate lease pricing? I have been quoted an MSRP of $25,200 for the Nitro SLT. I want to put 0 down, and lease for 27 months. Can anyone give me an estimate of what I should have for my payments, and a little explanation to tell the dealer as to why i think that price is what i should get? I'm new to this stuff, thanks.
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Replying to: er0si0n (May 03, 2007 5:26 pm) tidester, host SUVs and Smart Shopper
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Replying to: tidester (May 03, 2007 7:05 pm) Money Factor: Also called a lease factor or even a lease fee, this is the interest rate you are being charged. It is expressed as a multiplier that can be used to calculate your monthly payments. For example, 7.2 percent interest, when expressed as a money factor, is .0033. To convert a money factor to an interest rate, multiply by 2,400. To convert an interest rate to a money factor, divide by 2,400. (Always use 2,400 regardless of the length of the loan.) My question is: Why is 2400 always used and when I multiply 7.2 percent by 2400 I come up with .0030 not .0033 as indicated in the Edmunds definition.
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Replying to: rockfish1 (May 05, 2007 5:58 am) Now, over the course of a loan (lease) the principal on which you are paying interest decreases so your monthly interest payment decreases. If you made a graph of the amount of interest you pay each month you would find that the graph is practically a straight line. This means that your average monthly interest payment is simply the average of your first and last monthly interest payments or one half of their sum! Since the first payment is based on the full cap cost and the last payment is based on the residual, the average interest payment is monthly interest rate × (cap + residual) ÷ 2. In effect, your average interest rate is annual percentage rate ÷ 12 ÷ 2. That gives you the factor of 24 and an additional factor of 100 converts percentage rate to "percentage points" so you have a factor of 2400! Finally, the Edmunds number you quoted should be 0.003. Thanks for pointing it out! tidester, host SUVs and Smart Shopper
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Replying to: tidester (May 05, 2007 11:48 am) I knew a great and esteemed host like you would have the explanation. Just to understand the formula better I ran the calculations on the highest interest payment on cap cost and lowest interest payment on residual value adding them together and divided by 2 and came to the same results as your formula which is the same as using the moneyfactor calculation. As expected all agreed! I would suggest you add your 2400 explanation to the Edmunds money factor definition in case any other inquisitive member is in need of further info. I should have asked this question in the leasing forum so your explanation could help others that may have the same question.
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Replying to: rockfish1 (May 05, 2007 7:05 pm) tidester, host SUVs and Smart Shopper
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Replying to: tidester (May 05, 2007 9:04 pm) |
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| I'm interested in a single payment lease (not on an LR), but everyone I have talked to tells me that is a bad idea, but nobody can tell me why. | |
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Replying to: grandtotal (May 10, 2007 9:22 am) If the car is totalled, don't you just lose the amount you're upside down? That's probably why. |
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Replying to: grandtotal (May 10, 2007 9:22 am) Lease is about transfering ownership risk (depreciation) to somebody else (lessor) - for a fee of course. Large cap cost reduction/one time payments transfer that risk back to the lessee.
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