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How to Calculate Monthly Lease Payments



  • delta737hdelta737h Posts: 622
    I have no idea what I was thinking when I computed the taxable payment in Post #29. I should have excluded the $500 cap reduction. The taxable payment should be...

    0.00200 x (24,600 + 18,000) + (24,600 – 18,000) / 36 = 268.53

    Therefore, the total NJ sales tax liability amounts to...

    0.07 x 36 x 268.53 = 676.70

    The "lease payment" is based on the following data (we'll roll the tax into the lease)...

    MSRP…………………….…… 30,000
    Sell Price (S)...…………….…... 27,000
    Acq. Fee (A)…………….…….. 600.00
    Trade Equity (Q)...………..…… (1,000)
    NJ Sales Tax........................ 676.70
    Gross Cap………………..…… 29,276.70
    Cap reduction (D)…………...… 500.00
    Adjusted Cap (C)……………… 28,776.70
    Money factor (F)………………. 0.00200
    Residual Factor………………. 0.60
    Residual Value (R)…………. 18,000.00
    Term (N months)....…………. 36
    NJ sales Tax Rate (t)………… 7%

    and is computed as follows...

    Lease Payment = 0.00200 x (28,776.70 + 18,000) + (28,776.70 – 18,000) / 36
    = 392.91


  • wtalbotwtalbot Posts: 14
    I think this is true to an extent, however, I am well over my mileage allowance, but as long as I stick with Honda on another lease I don't have to worry about it. I will be turning it in in the next month or two and if I am incorrect about that I would sure like to know. They have told me all I have to do is bring it in and drive out in a new lease, no matter the mileage.
  • kyfdxkyfdx Everywhere, USAPosts: 126,124
    Well... technically, it's true.... but, you'll still be paying for the over-mileage charges.. If they are turning your car back into Honda Finance, you'll either have to pay the charges, or they'll just roll them into your new lease payment (making it higher than it would be otherwise)...

    If they are buying your car from Honda Finance, then that extra mileage will certainly make your car worth less to them, and that difference will be rolled into your new lease payment..

    So, yeah.... you bring it in, and drive out with a new lease, no matter your mileage.... but, it will be reflected in your new lease payment.

    No free lunch, I'm afraid...

    Now, I don't necessarily agree that high-mileage drivers shouldn't lease... Properly constructed, a high-mileage lease can be the cheapest way to go, especially if you would trade every three years, anyway..


    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • jayriderjayrider Posts: 3,602
    You can avoid any over mileage charges and damage by purchasing the car instead of turning it in.
  • wtalbotwtalbot Posts: 14
    Oh wow, they mislead me I do believe. Amazing I am going on my 4th lease and did not fully understand this. Out of those leases I have never traded one lease in with the same auto maker for another. I haven't worried about mileage because I was under the impression that if I got another Honda it didn't matter.

    I am pretty sure the dealer will buy it for resale, so now it is a matter of negotiating the trade in value? I don't believe Honda will let me sell the vehicle to a 3rd party either? I guess if they don't give me the payoff amount I can just go turn it in myself, pay the mileage and go lease another vehicle. A little incentive if they really want the car.

    This changes things a bit.
  • dpb67dpb67 Posts: 6
    Does anyone have an idea what the current residual and money factors are for a 2011 Sorento in NJ?

  • delta737hdelta737h Posts: 622
    edited June 2010

    You may want to try the Sorento message board...

    and re-post.

    I'm sure that one of the moderators or, a knowledgeable poster, will be happy to help you. This message board is reserved for questions concerning lease payment calculations for which you're not likely to get a timely response to your question.

  • kyfdxkyfdx Everywhere, USAPosts: 126,124
    I created a new discussion for Sorento leasing for you (Kia leasing used to be non-existent, but it seems to have revived)..

    You can find it HERE

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • artwheelsartwheels Posts: 6
    I’m planning to lease a 2010 Toyota Prius II, & have done a lot of research—all of it on 12k miles a year. However, as I currently drive under 10,000 miles a year, I realize I should get a lease for 10,000 miles a year. duh. (Both my lease & insurance would be cheaper, & it’s highly unlikely I’ll be driving 12k miles a year.) Toyota is currently offering specials, including .00020 money factor. Here’s my dealer’s offer: 0 down, & $200 a month for 36 months re a 12,000 miles a year lease. (This includes taxes, bank fee, destination fee, & DMV fee--& is way lower than what other dealers have been offering.) My question is: If I lower my mileage down to 10k instead of 12k a year, what should my monthly payment be? (How much less should I pay a month?) Thank you so much! I appreciate your response. Best, Artwheels
  • delta737hdelta737h Posts: 622
    edited July 2010
    Greetings artwheels!

    It's rare times like this that I wish that the edmunds website supported mathematical fonts.

    Using differential analysis, the formula for the change in payment, given a percentage change in the residual, with all other variables held constant is...

    %P = (f - 1/N)S(%r) **


    %P = monetary change in payment
    f = money factor
    N = term
    S = Adj MSRP upon which the residual value is calculated
    %r = percentage points change in the residual factor


    Consider the following hypothetical data...

    Adj. MSRP = 25,000 (some options may only be partially residualized or not
    residualized at all which lowers the MSRP hence "Adj"

    Money Factor = 0.00200
    Term = 36 months
    Net Cap = 20,000
    Res. Factor = 60%
    Res. Value = Res. Factor x Adj. MSRP = 0.60 x 25,000 = 15,000 for 12K miles

    Using the money factor formula, the above data yields a payment of...

    P = 0.00200 x (20,000 + 15,000) + (20,000 - 15,000) / 36
    = 208.89

    But, if we lower the mileage to 10K, the residual factor may increase from 60% to 62%... a 2 percentage points increase (+2% or +0.02)... the residual value increases to 15,500 (0.62 x 25,000) and so, the new lower payment is...

    *P = 0.00200 x (20,000 + 15,500) + (20,000 - 15,500) / 36
    = 196.00

    Observe that the payment dropped by 12.89 (i.e., -12.89).

    We can easily calculate this payment change (-12.89) by using one formula instead of two and circumnavigate a lot of work just by using the above forrmula...

    %P = (f - 1/N)S(%r) **

    = (0.00200 - 1/36)(25,000)(+0.02) (the positive sign indicates an increase)

    = -12.89 (the negative sign indicates a decrease)

    This formula has the advantage of quickly determining how your payment will change (up (+) of down (-)) and, by how much.

    ** Toyota is notorious for not residualizing the destination charge and floor
    mats. I'm not sure if they deploy residual factors or not. If not, then they use flat dollar amounts instead. In this case, S(%r) is simply the change (up (+), down (-)) in the residual dollar amounts.

    Questions? Please let me know.

    All the best...

  • jwilliams2jwilliams2 Posts: 910
    edited July 2010
    Probably about $12 per month less. What did the dealer offer?
  • artwheelsartwheels Posts: 6
    Thank you so much, John. That is most helpful! Alas, I have just discovered the question is moot, as the Toyota special doesn't include 10k miles leases, only 12k miles. It's such a great offer, I'll go w it & have a large margin re mileage. I appreciate your prompt and thorough explanation--most interesting!!

  • artwheelsartwheels Posts: 6
    I've just discovered it's a moot question--the Toyota special is only for 12k mi leases. It's such a good offer, I'll go w it. I appreciate your input, it's very helpful!

  • pazzo1pazzo1 Posts: 17
    Has anyone ever leased on with putting down a security deposit to lower the money factor? Dealer explained that the entire security deposit would be reimbursed at end of lease provided not over miles, no excessive damage etc. This is just another way of leasing a car.

    Any feedback appreciated.
  • delta737hdelta737h Posts: 622
    edited August 2010

    Sometimes, fund providers, especially the manufacturer finance captives (e.g., BMW, IFS, etc), will reduce the money factor in exchange for a refundable security deposit. Some will even allow multiple security deposits (MSD's) in exhange for an even great reduction in the money factor. MSD's are usually fantastic no-brainer deals for the consumer. For instance, let's assume that each security deposit reduces the money factor by 0.00007 and that the limiting number of MSD's is 7. This means that the max reduction is 7 x 0.00007 or 0.00049. So, if the prevailing money factor is 0.00200 and 7 MSD's are advanced, then the adjusted money factor is 0.00200 - 0.00049 = 0.00151

    Hope this helps,

  • kyfdxkyfdx Everywhere, USAPosts: 126,124
    Making a security deposit on your lease with a bank is pretty straightforward.. Your turn-in fees at the end of the lease aren't dependent on the amount of your security deposit... If you are due money at then end, they'll pay it..

    It isn't like dealing with a sleazy landlord, who makes up charges just to keep your money.. ;)

    Now their end-of-lease charges may be onerous, and out of line.. but, it won't be related to the size of your security deposit...

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • Hi All,

    I am about to conclude my 2nd lease with Honda and am now looking at the market to see what vehicle I would like to move into.

    The last time I leased with Honda, I waited until I saw an advertised lease that I wanted and then walked in to the dealership and signed up for that lease - amazingly enough at the advertised price.

    This time, I am looking at a 2010 Honda CRV, and while they are advertising the LX model for $239 @ month with $1999 down, I want the EX model.

    So my question for you guys, is how do I determine what I should pay to move up to the EX model? That is of course with the thinking that I can get the same 'market rate/percentage' like I did last time.

    Thanks for the help!


    PS. All my Honda leases have been with the same dealership, if this matters at
  • We are looking at getting into a 2011 Honda Odyssey EX, and I just can’t seem to get my calculation right, I keep coming in less than quoted payment of $422 w/ tax. Any help would be greatly appreciated! Below are all the figures the dealer provided to me
    $31730 MSRP
    $30392 agreed price
    cap cost $31025 (not sure where the difference comes from between agreed price and cap cost?)
    36 months
    12000 miles per year
    $21259.10 or 67% residual
    $973.23 tax
    .00200 Honda Finance lease money factor
    250 doc fee
    $54.50 title/reg
    $595 Acquisition fee
    Rolling first month into lease so 0.00 out of pocket at lease inception
  • delta737hdelta737h Posts: 622
    edited October 2010

    The gross cap is the sum of the agreed upon value and any amounts financed. The adjusted cap is the gross cap less any cap reduction. So, when you say that the cap cost is $31,025, I have no idea whether you're referring to the gross or the adjusted. It's unlikely that it is the gross cap as it doesn't capture the $973.23 tax as well as the $250 doc fee and $595 acq fee. There is a lot of information missing. I need an itemization of amounts financed as well as cap reductions. All numbers must be stated to the penny. Ball park numbers don't cut it.

    You didn't indicate your state or sales tax rate but I have a hunch you're in Ohio judging by your numbers. If so, Ohio Honda dealerships do not compute monthly payments correctly in those instances where the first payment and taxes are capitalized. This has been an on-going complaint of mine for many years and no one seems to want to do anything about. It's sloppy business and, frankly, I won't tolerate it. A few weeks ago, I leased a 2010 CR-V and refused to sign the lease until all numbers were spot-on. It took them a few days, but eventually they corrected it. Actually, I think the software providers are the problem.

    At any rate (no pun intended), the best thing to do is ask the dealer for their lease worksheet. This is a computer generated document that will tell you everything you want to know and then some. Don't let them tell you that they can't give it to you because that's a lot of horse dump. If you like, you can email it to me at

    [email protected]

    and I'll be happy to analyze it for you.

  • dodgehappydodgehappy Posts: 118
    edited October 2010
    Thanks John for the info. I will see what I can get from the dealer and email it over.

    Question, if I am putting 0.00 out of pocket, wouldnt all fees/taxes be financed as part of the deal plus the first monthly payment? So the cap cost would actually read higher than what he told me was cap cost? Maybe I am misunderstanding it?
    Maybe I am way off and just need to stick to the lease worksheet?!
    Yes, Ohio is correct for tax :)

    Thanks again
  • delta737hdelta737h Posts: 622

    Here is how it works...

    Agreed Upon Value (sell price) + Amounts Financed = Gross Cap

    Amounts financed include your first payment, doc fee, acq fee, DMV fee, and taxes.

    Gross Cap - Cap Reduction = Adjusted Cap Cost

    If there is no Cap Reduction, then Gross Cap = Adj. Cap.

    Res Factor x MSRP = Residual Value

    Monthly Pmt = money factor x (Adj. Cap+Res Val.) + (Adj. Cap - Res Val.) / Term

    I'm happy to review the lease worksheet and look forward to receiving it.

  • Thank again John. I got ahold of the dealers worksheets and emailed them over to you this evening.
  • I have a question regarding paying taxes. When a leasing special says excludes taxes, tags, and fees. I live in MD. When you pay taxes for a car lease do you pay on the sales price of the car (as if you're buying) or do you pay tax on the monthly payment? I understand that you can roll your taxes into your monthly payment; however, the tax on the sales price of a car such as the Accord in MD (6%) is much greater than the tax(6%) on the sum of all the monthly payments. Can someone please explain.

    Basically, do you pay tax on the portion you lease for or for the entirety of the negotiated sales price of the car?
  • kyfdxkyfdx Everywhere, USAPosts: 126,124
    It depends on the state.. The majority of states tax the payment, each month, or tax the total of payments.. However, there are a few (maybe 10?), that tax then entire sales prices of the car..

    Unfortunately, I believe Maryland is one of those states..

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • delta737hdelta737h Posts: 622
    edited November 2010

    There are four (4) methods used to compute sales tax ...

    (1) Tax the lease payment as they are received. This is the easiest and by far the
    most commonly used method in such states as FL, PA, and CA
    (2) Tax the selling price (IL, MD, TX, WA)
    (3) Tax the sum of the taxable payments (NJ, NY, OH)
    (4) Tax the depreciation (CO)

    Every state uses one of these methods. Dealers do not determine how sales tax is computed; individual states make this determination and regulate, accordingly. Depending upon how the lease is structured, the sales tax calculation can be very straight-forward and easy or quite complex. To compound the problem, states have different regs regarding the taxability of fees and rebates. Some tax acquisition fees and rebates; others don't. Those that tax depreciation often define depreciation differently with respect to one another. Some define it as the difference between the adjusted cap and the residual while others define it as the difference between the sell price and residual. Some use the mathematically correct formulas to compute taxes in those instances where taxes are capped in the lease; others don't such as NY. Some states levy tax on tax (Yup, it's NY) when taxes are capped. This, of course, is illegal in most states. I have no clue why this has gone unchallenged in NY. Perhaps no one realizes it except the NY Dept of Revenue's Sales Tax Division.

    In Maryland, tax on a lease is levied on the selling price (i.e., Agreed Upon Value) at 6%. I'm not sure whether they call this tax a sales tax or a titling tax but it is levied on the sell price for both leases and purchases.

    Hope this helps.

  • Hi all!

    I am not to bright so I am looking to you who are!

    I am looking at leasing the Honda Accord LX the dealer has three offers:

    Starting at MRSP at 22,605 with 2000 trade-in to 20,605 at $285 for 3yrs/15K miles per year and nothing down;

    Starting at MRSP at 22,605 with 2700 discount to 19,905 at $241 for 3yrs/15K miles per year with 1500 down

    Discounted MRSP to 21,105 with 700 trade-in to 20,405 at $248 for 3yrs/15K miles per year with 1500 down;

    I cannot figure out what they are doing….???

    I am reading and studying but I cannot differentiate yet between vehicle price, gross cap price, cap reduction price and adjusted or net cap price?

    Any help is greatly appreciated.

  • Hello:
    I have been quoted this via email:

    36 months/12K
    Selling price $29,918
    MF .001390
    Residual 58%
    License fee $307
    Doc fee $259
    "Inception fees" $1932.65 including "DMV fee, tire tax, NJ tax, doc fee" (? would that mean I'm paying all sales tax up front? at 7%)
    "Buy out" $19299.50
    Monthly payment $380.74

    I'm not the brightest bulb in the math class but I have been using a lease worksheet I found for Excel and am coming out with a monthly payment closer to $360. I think I may have been calculating the tax incorrectly, but for my life I can't figure it out.

    Otherwise if you think this might be a good deal, I want to lock him in!

    Separate question: this is my 4th Honda and 3rd dealer. I am finding that when I go back to my previous dealer, they never seem very interested in my business. (not just Hondas, but previous other mfr leases as well.) Do they not make much commission on leasing? Why do I now have to do all the pursuing, after having received their letters in the mail for the last 6 months begging me to come in? I gave my salesman 4 weeks and when I called to follow up, he had forgotten about me (though he wouldn't admit it) then emailed me a ridiculous quote to which I responded (in a nice way) and haven't heard from him since?
    any thoughts?
  • Greetings ayalakay!

    You're doing just fine and have raised some good questions. Your 380.74 payment does not capture NJ sales tax which amounts to 959.43. In order to capture this tax, your payment would have to be 408.71. Here is the breakdown of your lease quote based on the information you have provided…

    MSRP……………………….. 33,275.00

    Sell Price……………………. 29,918.45

    Amounts Financed

    AHFC Acquisition Fee……… 595.00

    Gross Cap Cost…………….. 30,513.45
    Cap Reduction……………… 0.00
    Adjusted Cap………………. 30,513.45

    Money Factor………………. 0.00139
    Residual Factor……………. 58%
    Residual Value……………. 19,299.50 (Res. Factor x MSRP)

    Monthly Payment…………. 380.74

    Amounts Due at Signing

    1st. Payment………………… 380.74
    NJ Sales Tax @7.00%........... 959.43
    Doc Fee……………………… 259.00
    Doc Fee Tax @7.00%........... 18.13
    DMV Fees…………………... 307.00
    Tire Fee……………………... 7.50
    TOTAL DUE………………… 1,931.80

    I seem to be $0.85 short of your $1,932.65. Perhaps you rounded a few numbers? I’m guessing that your 360 payment (actually, 363.39) may be the result of not capitalizing the 595 acquisition fee.

    As for the dealership issues you’re having, I wouldn’t worry about it. They need you more than you need them. The commission on leases is no different than the commission on sales. The reason is that every leased car is a sold car. Someone is buying it and that someone is usually the fund provider (AHFC in your case).

    Should you have further questions or would like a cost-saving lease proposal that makes sense, please visit my website…

    Hope this helps!

  • Here is a quick Matlab/Octave script you can use to figure out monthly payments on car or house or anything :-)


    function test_mortgage( cost, downpay, rate, year )

    base = cost - downpay;

    disp( strcat( [ 'Loan = ' num2str(base) ] ) );

    pay = 0;

    for i = 1 : 12 * year

    pay = pay + ( ( base / 12 ) * ( ( 1 / year ) + ( ( rate / 100 ) * ( 1 - ( ( i - 1 ) / ( 12 * year ) ) ) ) ) ) ;


    disp( strcat( [ 'Interest = ' num2str((pay - base)) ] ) );

    disp( strcat( [ 'Total = ' num2str(pay) ] ) );

    pay = pay / ( 12 * year ) ;

    disp( strcat( [ 'Monthly = ' num2str(pay) ] ) );




    1. Car for $14,670, $0 down, 5 years 0% APR loan:

    >> test_mortgage(14670,0,0,5)
    Loan = 14670
    Interest = 0
    Total = 14670
    Monthly = 244.5

    2. $20k credit card balance with 19% APR to be paid off in 3 years:

    >> test_mortgage(2e4,0,19,3)
    Loan = 20000
    Interest = 5858.3333
    Total = 25858.3333
    Monthly = 718.287

    3. House for $1.2 million, $250k down, 30 years 4% fixed rate mortgage:

    >> test_mortgage(1.2e6,2.5e5,4,30)
    Loan = 950000
    Interest = 571583.3333
    Total = 1521583.3333
    Monthly = 4226.6204
  • Many Thanks, John!
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