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# How Do I Calculate Monthly Lease Payments?

CarMan@Edmunds
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**38,514**
in General

For some reason my original post that explained how to calculate monthly lease payments seems to have disappeared in our transition to the new Town Hall software. Given this topic's popularity and numerous requests to bring it back, I have decided to create a new discussion on the subject.

To calculate a vehicle's capitalized cost, take its selling price subtract your down payment.

To calculate your vehicle's residual value, multiply its full MSRP (

To determine your vehicle's depreciaiotn, subract its residual value from your capitalized cost.

To figure out your car or truck's monthly depreciation, divide the total depreciation that you just calculated by the number of months that you are going to lease it for.

To determine the interest portion of your monthly lease payment add your vehicle's capitalized cost and its residual value and then multiply the result times your bank's lease money factor.

Finally, add the results from Step 4 (the monthly depreciation) and Step 5 (the monthly interest charge) to come up with your pre-tax monthly lease payment.

__How to Calculate Monthly Lease Payments__**Step 1: Calculate the Capitalized Cost**To calculate a vehicle's capitalized cost, take its selling price subtract your down payment.

**Step 2: Calculate Your Vehicle's Residual Value**To calculate your vehicle's residual value, multiply its full MSRP (

*note some banks will only allow consumers to residualize certain options or will place a cap on the amount of money that can be residualized for each option*) times its residual value percentage. The residual value percentage is determined by the bank that you are leasing through.**Step 3: Determine Your Vehicle's Total Depreciation**To determine your vehicle's depreciaiotn, subract its residual value from your capitalized cost.

**Step 4: Determine Your Vehicle's Monthly Depreciation**To figure out your car or truck's monthly depreciation, divide the total depreciation that you just calculated by the number of months that you are going to lease it for.

**Step 5: Determine Interest Charges**To determine the interest portion of your monthly lease payment add your vehicle's capitalized cost and its residual value and then multiply the result times your bank's lease money factor.

**Step 6: Calculate Monthly Payment**Finally, add the results from Step 4 (the monthly depreciation) and Step 5 (the monthly interest charge) to come up with your pre-tax monthly lease payment.

*Car_Man*

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## Comments

714You rock. this saved me a few grand. And to show my appreciation I put an excel spreadsheet together to do perform this calcualtion.

Anyone who emails me, can have it for free.

Never let the dealer figure out your lease payment - when you udnerstand how it works and can do this yourself- it will save you THOUSANDS!!

965Could you shoot me a copy of that spread sheet too, please?

I've never leased a car before, but am considering it now. In general terms, it seems that if the lease is a good deal, then probably it has a high residual which would make buying it at the end of the lease a bad deal. But with a low residual, then buying it at the end might make more sense.

Is that a correct interpretation of the overall principle?

I'm not sure it's for me, I usually keep my cars a long time, but maybe a lease plus a buy at the end *might* make sense, depending how numbers work out.

714714You will always have the option at the end of the lease to buy the vehicle at a stated price that will not change. When you lease the vehicle the finance company estimates the value of the vehicle at the end of the lease.

Take my Pilot, full MSRP was 33,600. With my 36/15K lease the value will be 18,480.

If the pilot holds it value and lets say it is worth $20,000, I can buy that vehicle for only $18,480 OR I can buy the vehicle for $18,480, then trade it in on my new vehicle and put $1,520 in my pocket PLUS save sales taxes on the trade in.

If at the end of the lease the Pilot is only worth 17K, I just give it to the dealer and walk away.

IMO, leasing should not be done unless you running the car through a business or you simply must have a new car every 3 years and you can keep it in good shape and meet the milage requirements. YMMV

8,502The guy that was right side up had a Very sharp 4wd Toyota Tacoma extended cab manual transmission which I think was a 1999. It had close to a 100,000 miles and was still worth over 10,000 dollars on a trade. He owed 9,300 though because he leased first then bought out the lease.

714We ended up with a new Ody and did the buy/trade-in at the dealership.

In all honesty, I have considered this my once in a lifetime lease victory.

8,5023,613-Brian

714If I knew how to attach the spreadsheet I would.

Basically all I did was take the instructions from Car_Mans opening post and put it into a workable spreadsheet. I then fine tuned it to apply to my situation and then tested it against other web based applications like lease calculater to make sure it worked.

Once you see it on paper, it is actually very easy to work out the payments with a pencil and paper. But I wanted to take my laptop to the dealer and crunch the numbers with him to verify everything.

38,514Car_manHost

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8Can I get that spreadsheet?

Thanks a million.......citymom

714*smile*

9652You mention that this is a pre-tax monthly lease payment.

I live in IL. On a recent lease they charged full tax on the purchase price of the vehicle. Is this legitamite? Also, I did my preplanning on Edmunds lease calculator and in putting the same info here as on the Toyota dealership program, the difference was around $60/mo they were higher. Any possible explanation for this. Thanks.

Krumb

714If I can jump in (with all due respect to Car_man) This is confusing, so follow me. IL looks at the leasing company (Lessor) as the "true" owner of the vehicle and is one of only 2 states (texas being the other I believe) that imposes a tax on the "sales" price of the vehicle.

Which in turn the leasing company (lessor)passes on to you the driver (the lessee). So technically you are not being charged the tax, only reimbursing the Lessor for his tax cost.

Now, are you ready for this? If you at the end of the lease decide to purchase the vehicle for it's residual value, you are subject to sales tax on the entire purchase amount (ie residual value).

This is one of the many wacky ways IL operates its sales and use tax.

As far as your $60 issue, did you factor in the lease inititian fee?? This was something I forget that Honda hit me up with..or did you get NAV, RES or some other funky options wich will change the residual %? Just some thoughts.

38,514One possible reason why the lease payment that you cane up with is different than the one that the dealership quoted you is the strange way that Toyota Financial Services calculates vehicles' residual values. While most banks allow the full residualization of most factory-installed options, TFS limits the number of and prices of options that can be residualized.

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5,092Thanks for your cooperation!

1-Marcy

26714I would be happy to send, but your emails are "private" so I have no way of knowing how to email you.

3,613-Brian

2Looking at the two calculations, the one Car_Man provided and the Edmunds calculator the difference seems to be that Edmunds doesn't add the tax into the capitalized cost which it does on my lease.

Just curious how do other states calculate tax? Maybe I can get a grass roots movement going here.

Krumb

1,795Very simplistic since you'll have to add the tax.

714There was legislation that stalled about 5 years ago to change it. Especially since, if you lease a vehicle, you pay tax on the full vehicle, say 30K.

If you walk away and lease another vehicle- no trade in credit.

Then if you decide to buy it at the 18K residual, you pay tax AGAIN on the 18K!

This is Illinois *rattle* logic:

The Leasing Company OWNS the vehicle and is SUBJECT to the tax. Ever notice in a lease you never sign the sales tax form.

The Leasing Company is allowed to pass the tax on to you the lessee - which they always do. And this is common is about all states.

So when YOU buy the vehicle at lease end YOU never were subject to the tax according to IL so you are not getting double whammied.

I believe sales tax in most states is calculated either one of two ways.

1. Based solely on the depreciation element.

2. The tax is added on to the actual lease payment.

After april 15th I will investigate and put a list together for all who read.

21. How can you figure out how much more the lease should be for 12k vs 15k?

2. The dealer said that the sales tax was 9% ( I live outside of Philly), is this true? Is there some reason that a lease would be taxed higher? PA sales tax is 6%

On a 06 pilot EXL AWD 15k lease They offered me sale price 29780 with 2000 down, .ooo68 MF(forgot to write down the residual) with a monthly payment of 374. I wasn't comfortable with this and wanted to do some more research.

Any answers to above questions or comments on the above deal would be greatly appreciated

38,514I am not personally familiar with how sales tax is calculated on leased vehicles in your area, but you may be able to find out more information on this subject by visiting the following sites: Pennsylvania Driver & Vehicle Services or Pennsylvania Department of Revenue.

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1138,514Car_manHost

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693http://h1.ripway.com/RedlineJunkie/Public/LeaseCalculator.xls

594BUT: When you plug the numbers into the formula given by Car_man here on Edmunds.com, the payment should have been $796. before taxes. The salesman said, "I don't do the actual numbers, they give them to me." Really.....

The bottom line is that you need to check your proposed payment with the information and formula in this forum. It will save you money. And, no, I did not lease a car from this dealer.

Thank you, Car_man. As several people have posted, car leasing is no longer a mystery. Just do the math and check the numbers.

26Given the way the leasing industry calculates their pmts, the data entry is not equivalent to how you would input the data to calculate a standard mtg payment.

Thanks

26Can you send it over to me also? Thanks in advance.

Also, I just posted this in a separate email:

Does anyone know if it is possible to replicate the car lease payment calculation (Depreciation + Rent Charge + Tax) on the HP17B (or any fin calculator for that matter) given the MSRP, money factor, term, residual value, etc?

Given the way the leasing industry calculates their pmts, the data entry is not equivalent to how you would input the data to calculate a standard mtg payment (I do get it to be very close on a pre-tax basis and then adding the tax is easy)

1,207USLEASE:PMT=((CC-RV)/N)+((CC+RV)*MF)

Note that / should be entered using the divide key and * should be entered using the multiply key.

PMT = Monthly Payment

CC = Cap Cost

RV = Residual Value ($ amount)

N = Number of payments

MF = Money Factor

1,060Any help would be appreciated.

Thanks, NORTSR1

11,148MODERATOR /ADMINISTRATORNeed help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.

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1,06010,059The host hasn't posted since July 2nd????That's because no one has posted a question since then. He'll be around to it!

tidester, host5MSRP: 35650

Selling Price: 28426

Tax 7%

Destination 650

Mileage 15000 year.

Now how would i figure out the lease price for a 27 month lease? how do you figure down payment? This will be leased in NJ. Is there a formula. Thanks in advance for any help.

22236,410regards,

kyfdx

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

Edmunds Moderator6i was told the $1000 rebate for the murano is not avalible for a lease??

:mad: i was giving a price for the sl w/touring msrp around $36000. OK for 39mo 12k

$5000down $279 a month capilization of $34000 can i do any better??100Golic - I would love a copy of your spreadsheet. Unfortunately, I see your email is now set to private. However, mine is not. Could you please send it to me?

FYI - I am now coming to the end (end of June) of my third consecutive lease. Two three-year Dodge Caravans, and now the latest, a 4 year Mazda MPV. I am going to break the "mini-van chain" and go SUV. So there is much research to do.

I just want to let anyone know, that I now have 10 years of lease "experience" (yikes) so if anyone has any questions they think I can help them with, please do not hesitate to ask. I certainly will not.

100a year agoAnyway, I've grabbed

thisExcel file, so I will work with this.Thanks redline65, for uploading this.

2010,059tidester, hostSUVs and Smart Shopper

3,299Make sure to ask about off lease rebates.

100I will make good use of it.

107jdls22@aol.com