How to Calculate the Interest on a Lease

For some consumers, the option to lease a vehicle is more attractive than the option to purchase it outright. Monthly payments on an auto lease are computed as a sum of interest and what's known as a "depreciation" payment. The calculation to determine what percentage of your monthly payment is interest is unusual. With a little patience and concentration, however, you'll be able to complete it in no time.

Instructions

1

Call your dealership to obtain the manufacturer's suggested retail price (MSRP) for your vehicle. Ask the salesperson for the "residual value" of the car, which represents what percentage of the car's value will remain at the end of the lease term. As an example, you have a vehicle with an MSRP of $30,000 and a residual value of 55 percent.

2

Express your residual value as a decimal by dividing it by 100. Multiply this decimal by the MSRP of your car. For the example, this results in a monetary residual value of $16,500.

3

Determine your "money factor," which is a special number used to calculate the interest on all auto leases, regardless of term length. Divide your whole-number interest rate by 2,400. If the example vehicle has an interest rate of 8 percent, its money factor is .0033.

4

Add your MSRP and monetary residual value together. For the example vehicle, this results in a sum of $46,500.

5

Multiply this sum by your money factor to determine the amount of interest included in each month's payment. For the example, this is $153.45.