How to Calculate Lease Payments on Auto Loans

Figuring a lease payment is slightly different than figuring a monthly car payment, where you'll own the car at the end of the loan. In a lease situation, the dealer provides something called a "residual value in the contract." The residual value is the amount of money that the car will be worth at the end of the loan. When calculating lease payments, you essentially substitute the residual value on the lease of a car where you'd substitute a zero balance on the purchase of an automobile.

Instructions

1

Write down a two-part equation that is the basis of your lease payment. The first part of the equation is the depreciation fee, which is the amount of money the automobile depreciates over the length of your lease, based on the amount of miles you drive. The miles are usually capped and anything over the cap results in a per-mile fee. The second part of the equation is the finance fee, or the interest rate you'll pay on the loan. When those two items are added, you will find the lease payment per month.

Depreciation Fee + Finance Fee=Lease Payment

2

Calculate the depreciation fee. The depreciation fee is figured with the following equation:

Purchase Price - Residual Value / Term of the Lease.

For example, if a car worth $35,000 will have a residual vale of $25,000 at the end of a 36 month lease, the equation becomes:

($35,000 - $25,000) / 36 = $277.78 per month.

3

Find the money factor to get the interest rate you're being charged. You must ask the dealer what the money factor is for the loan. The money factor is the number automobile sellers calculate interest and is given in decimal form. For example, the money factor might be .00375.

4

Calculate the finance fee. Because you are driving the vehicle while the seller still technically owns it, the finance fee is calculated by adding the net cost of the car plus the residual value. The net car cost is taken after any down-payments or trade-ins have been made on the car. For example , if you do not make a down payment and the money factor is .00375, the finance fee equation becomes ($35,000 + $25,000) x .00375] = 225

(Net Cost + Residual Value) x Money Factor = Finance Fee

5

Add the finance fee to the depreciation fee to get your monthly lease payment. In the above example, the monthly lease payment would be $502.78:

$277.78 + $225.00 = 502.78.