How to Calculate Lease Payment With a Factor Rate

Most car lease payment amounts are a combination of two parts. The first part of the payment is the value of the vehicle you will be using up during the lease term divided by the number of months in the lease. The second part is a calculated interest amount on the money that is derived by a formula that uses a lease factor. How that lease factor is figured is not a secret. Most people can master the formula if they are made aware of the numbers that go into it.

Instructions

1

Subtract the value of the vehicle at the end of the lease from the initial price. This will give you the amount of the car's worth that will be consumed during the lease period. The residual value (value at the end of the lease) can be obtained from the dealer who is leasing the vehicle. If you are leasing a $30,000 vehicle that will be worth $18,000 at the end of a two-year lease, the amount of value used would be $12,000 ($30,000-$18,000).

2

Divide the difference by the months of the lease's duration. In this case, it would be $12,000 divided by 24 months. This would equal $500 per month of principal payment. The next step will be to calculate the interest cost per month during the lease period by using the lease factor.

3

Add the initial cost of the vehicle to its residual cost. This would be $30,000+$18,000 to equal $48,000. Now, divide the interest rate by the number of lease months to get the lease factor. If the interest is 12 percent, it would be 0.12 divided by 24 equals 0.005. Multiply this number by the product from the first part. This will be $48,000 times 0.005 equals $240.00.

4

Add the principal amount to the interest amount to arrive at the final payment. This is $500 + $240 equals $740 for the final payment amount. So, you will pay $740 per month for a two-year lease on a $30,000 vehicle at 12 percent interest.