You’ll be able to make good decisions about vehicle leasing if you learn how to configure the monthly payments. Many people don’t feel comfortable with “complicated” math, and often leave the calculations to the dealers.
It’s really not that hard! Once you understand all the numbers that are involved in the monthly payments calculations, everything else becomes easier.
The main figures include:
Manufacturer’s Suggested Retail Price (MSRP). This is the “window sticker price” of the vehicle, also known as the “list price”.
Money factor: This includes the interest rate on the lease. Make sure your dealer discloses this rate before making any decisions.
Lease term: Number of months that you lease the vehicle for.
Residual Value: this is how much the vehicle will be at the end of your lease. Once again, make sure your dealer gives you this information.
For example, we will calculate a lease payment on a car with a sticker price (MSRP) value of $20,000, and a 0.0034 money factor (this is the average quote). If the lease is scheduled for 4 years, and the estimated residual value percentage is 50%, then you can calculate as thus:
Multiply the MSRP and he residual value percentage.
$20,000 x .50 = $10,000
Now subtract that total by the MSRP value price to get $10,000 (or half)
$20,000 – $10,000 = $10,000
The amount of $10,000 is going to be used over a 48 month lease period which gives us a monthly payment of $10,000/48 = $208.33.
Now this is the first part in figuring out the monthly payment, and is referred to as the depreciation charge. The next part of our configuration is referred to as the “money factor payment”, and it factors in the interest charge. This is calculated by adding together the MSRP to the residual value, and then multiplying the result by the money factor.
($20,000 + $10,000) x .0034 = $102.
Finally, we get the estimated monthly payment by adding together the two numbers that we configured: $208.33 + $102 = $310.33!
In summary, the example goes like this:
1. Depreciation charge per month:
Depreciation Percentage x MSRP = Residual Value
MSRP – Residual Value = Lease Term Deprecation
Lease Term Deprecation / Number of months in the leae = monthly deprecation charge.
2. Monthly factor charge.
(MSRP + Residual Value) x Money Factor = Money Factor Payment
3. Monthly Payment
Money Factor Payment + Depreciation Charge (from steps 1 & 2) = Estimated Monthly Payment!
Remember, this is an example calculation and still doesn’t take account fees, taxes, or any other fees into consideration. This calculation gives you a rough estimate or idea of what your payments for the vehicle lease should be.
14 Dec
