Leasing a car is a confusing process for many buyers. It is, however, possible to calculate the lease payment so that you can understand how much you are actually paying for the car and make an educated decision about whether leasing a car makes good financial sense. To calculate lease payments on a new car, you will need to get some basic information from the car dealer.
Information Needed to Calculate a Lease
You will need to find out from the dealer what the manufacturer's suggested retail price, MSRP, is of the vehicle. This figure is also commonly referred to as the sticker price of the vehicle. In addition, you need to ask the dealer or bank financing the lease for the money factor. The money factor is the interest rate used for the lease payment calculation. The lease term is the duration of the lease expressed in months. Finally, you will need to ask for the residual value of the car expressed as a percent. The residual value is the value of the car at the end of the lease. This value is a predetermined percent that is written into the lease contract at the time of purchase.
Calculate Residual Value in Dollars
Calculate the value of the vehicle at the end of the lease by multiplying the MSRP by the residual value. For example, if the MSRP of the vehicle is $25,000 and the residual value is 55 percent the residual value expressed in dollars is $25,000 x .55 = $13,750.
Calculate Depreciation
Take the actual purchase price of the vehicle, assuming it is less than the MSRP, and subtract the residual value in dollars from this amount. Continuing the same example, and assuming an actual purchase price of $23,000, subtract $23,000 from $13,750 = $9,250. This figure represents the depreciation of the vehicle during the term of the lease.
Monthly Depreciation Payment
Divide the depreciation by the lease terms in months. Continuing the same example and assuming a 36 month lease, divide $9,250 by 36 = $256.94. This figure represents your monthly depreciation payment.
Monthly Payment Calculation
Take the actual purchase price of the vehicle, $23,000, and add the residual value in dollars, $13,750. This yields a total figure of $36,750 in our example. Multiply this figure by the money factor. Let's assume a money factor of .0033. This yields the money factor payment of $121.28. Add this figure to the monthly depreciation payment of $256.94 in this example, this results in a total lease payment of $378.22.
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