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Calculate Your Own Car Lease Payment

Edmunds.comEdmunds.com Posts: 10,059
edited April 2017 in Editorial
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Calculate Your Own Car Lease Payment

There are several ways to estimate your car lease payment, including setting up a spreadsheet to do the work for you.

Read the full story here


Comments

  • Thanks for all the information about leasing. It help me understand about leasing and learn what i have been doing wrong all this time.
  • I used this formula on a new VOLT and my Total Payment came to $686/mo.

    But the dealer offers $320/mo x 36 mo w/ $2500 down. With what looks like a 62% residual value.

    What gives?
  • a1s1a1a1s1a1 Posts: 20
    Can you clarify how does miles/year which takes into consideration "how much of car's value you will use" affects the above calculation
  • a1s1a1a1s1a1 Posts: 20
    Can you clarify how does miles/year which takes into consideration "how much of car's value you will use" affects the above calculation
  • baylisbaylis Posts: 1
    Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number? Can you explain a bit further, please?

    Expressed another way, if a simple amortization calculation is made (on an HP 12C calculator) using 36 months, 3% interest and a monthly payment of $232.77 (i.e. the 191.39 for the depreciation + the 41.38 for the interest), the present value being financed is $8,004, which is not the same as the $6,890 depreciation in your line 6. Why is there that difference? Apparently the financing is based on more than just the depreciation?

    So where am I going wrong? What am I missing in the explanation?

    Maybe this is "just the way they do it" but it would help to understand the concept/rationale better.

    Thanks very much.
    Baylis
  • Hi Philip. Thank you for the article. I have a question, that I hope you can answer. If one was to pay the lease payments upfront ($6890), would that reduce the amount that was subject to interest payments by $6890?

    So, in the case above, the amount multiplied by the money factor would be $26,220. Does this work?
  • Never Again Will A Dealership Profit From My Auto-Ignorance!
  • I'm looking at a Jett Sportwagen TDI. The dealer gave me a residual value of 70% (seems pretty high by consensus). Using this formula with their money factor of 0.00049, I came to a monthly payment, tax included, of just under $250.00/mo for 36 months. Earlier in negotiations he quoted me $338/mo. Is he trying to pull a fast one on me?
  • remag1234remag1234 Posts: 32
    Several friends are leasing some for the 3rd time. Here's what they're getting. No money down, payments $250-325 a month for 36 months. Quick calculation is the payments equal to Half the price of the purchase price. I realize there are many variables but I believe it's a good rule of thumb.
  • schnazola1schnazola1 Posts: 1
    edited December 2014
    @baylis: I was thinking the same thing. If the residual value were, say, 90% of the MSRP, then lines 11, 12, and 13 would be higher and produce a larger monthly lease payment. (Line #8 would be smaller, of course -- much smaller -- but you get the point.)

    "Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number?"
  • kyfdxkyfdx Posts: 130,385

    @baylis: I was thinking the same thing. If the residual value were, say, 90% of the MSRP, then lines 11, 12, and 13 would be higher and produce a larger monthly lease payment. (Line #8 would be smaller, of course -- much smaller -- but you get the point.)

    "Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number?"


    The two numbers are added, because the amount subject to finance charges is an average of those two numbers...

    You don't have to divide by 2 to get the averages, because that part of the calculation is accounted for in the money factor.

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

    Edmunds Moderator

  • ws1ws1 Posts: 8
    kyfdx said:

    @baylis: I was thinking the same thing. If the residual value were, say, 90% of the MSRP, then lines 11, 12, and 13 would be higher and produce a larger monthly lease payment. (Line #8 would be smaller, of course -- much smaller -- but you get the point.)

    "Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number?"


    The two numbers are added, because the amount subject to finance charges is an average of those two numbers...

    You don't have to divide by 2 to get the averages, because that part of the calculation is accounted for in the money factor.
    But how are you paying interest on an amount that is greater than what you are borrowing, if the true borrowed amount is basically the sales price of the car. I always thought the true "in the math mechanics" were something like an interest only loan for the residual and a normal amortizing loan for the depreciation?
  • kyfdxkyfdx Posts: 130,385
    ws1 said:

    kyfdx said:

    @baylis: I was thinking the same thing. If the residual value were, say, 90% of the MSRP, then lines 11, 12, and 13 would be higher and produce a larger monthly lease payment. (Line #8 would be smaller, of course -- much smaller -- but you get the point.)

    "Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number?"


    The two numbers are added, because the amount subject to finance charges is an average of those two numbers...

    You don't have to divide by 2 to get the averages, because that part of the calculation is accounted for in the money factor.
    But how are you paying interest on an amount that is greater than what you are borrowing, if the true borrowed amount is basically the sales price of the car. I always thought the true "in the math mechanics" were something like an interest only loan for the residual and a normal amortizing loan for the depreciation?

    You pay finance charges on an average of the net cap and the residual. To get an average, you add the two numbers together, then divide by 2. The division by 2 is accounted for already within the money factor.

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

    Edmunds Moderator

  • ws1ws1 Posts: 8
    kyfdx said:

    ws1 said:

    kyfdx said:

    @baylis: I was thinking the same thing. If the residual value were, say, 90% of the MSRP, then lines 11, 12, and 13 would be higher and produce a larger monthly lease payment. (Line #8 would be smaller, of course -- much smaller -- but you get the point.)

    "Gentlemen/Ladies -- Why, in lines 9 - 11 of the calculation, are the net capitalized cost (20,000) and the residual (13,110) added to produce 33,110? What is the concept of applying the money factor to that large number?"


    The two numbers are added, because the amount subject to finance charges is an average of those two numbers...

    You don't have to divide by 2 to get the averages, because that part of the calculation is accounted for in the money factor.
    But how are you paying interest on an amount that is greater than what you are borrowing, if the true borrowed amount is basically the sales price of the car. I always thought the true "in the math mechanics" were something like an interest only loan for the residual and a normal amortizing loan for the depreciation?

    You pay finance charges on an average of the net cap and the residual. To get an average, you add the two numbers together, then divide by 2. The division by 2 is accounted for already within the money factor.
    Ahhh. It's amazing the clever shortcuts we had to come up with before everyone had smartphones, the internet, or even excel.

  • Thanks so much for the info. I just had a question about amortizing freight & PDI over the term of the lease. How does the interest rate (or money factor) play into the monthly amount for freight & PDI?
  • kyfdxkyfdx Posts: 130,385

    Thanks so much for the info. I just had a question about amortizing freight & PDI over the term of the lease. How does the interest rate (or money factor) play into the monthly amount for freight & PDI?

    Freight and PDI aren't separate charges, no matter how the dealer plays with the numbers..

    There is MSRP (that's the bottom line of the sticker, including destination)
    And, there is the selling price...

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

    Edmunds Moderator

  • flann2flann2 Posts: 3
    Edmunds really provides a great service by providing this information. Thank you !!
  • We started our search for two new lease cars and the calculated lease payment were within $5 dollars at all car dealers/makers except one: Subaru. Either there program is incorrect or they added some factor to charge extra. Each of the three Subaru dealers that we saw was off by a constant $76 per month in overcharging for Forester 2.5i touring.
  • MichaellMichaell ColoradoPosts: 124,199

    We started our search for two new lease cars and the calculated lease payment were within $5 dollars at all car dealers/makers except one: Subaru. Either there program is incorrect or they added some factor to charge extra. Each of the three Subaru dealers that we saw was off by a constant $76 per month in overcharging for Forester 2.5i touring.

    Dealers are allowed to inflate the MF for more profit.

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • I've never commented before but I've been following a lot. I just leased a 2016 Q5 2.0q. I feel like I got a good deal. The dealer provided great service. Sometimes on here it seems like a game to try to make sure that they make no money at all.
  • They showed me the invoice and I paid $400 over. The money factor was .00042 more than what was listed here, so I assume they got a little there also. Thats ok, I know they have to keep the lights on. I feel like it was fair.
  • adamcaradamcar Posts: 24
    awarner01 said:

    They showed me the invoice and I paid $400 over. The money factor was .00042 more than what was listed here, so I assume they got a little there also. Thats ok, I know they have to keep the lights on. I feel like it was fair.

    Most dealerships only make real money in the service department and selling used vehicles. New sales are not very profitable, in the grand scheme of things.
  • knight14knight14 Posts: 3
    I used your above number that I plug in your lease simulator and I did not get the same number by far. Why?
  • MichaellMichaell ColoradoPosts: 124,199
    knight14 said:

    I used your above number that I plug in your lease simulator and I did not get the same number by far. Why?

    What numbers are you using?

    What payment are you expecting to see?

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • knight14knight14 Posts: 3
    I used the lease calculator (http://www.edmunds.com/calculators/car-lease.html) but I am confused with the Vehicle Sales Price, or Capitalized Cost. Does it correspond to line 4 here? If yes, where do you enter line 1?
  • knight14knight14 Posts: 3
    I plug the number the dealer gave to me in three different software to compute the monthly amount and they gave me the same amount within $1. The dealer is $39 higher. Where can the difference come from?
  • kyfdxkyfdx Posts: 130,385
    knight14 said:

    I plug the number the dealer gave to me in three different software to compute the monthly amount and they gave me the same amount within $1. The dealer is $39 higher. Where can the difference come from?

    Sorry, I can't vouch for on-line calculators, and I can't see what you are inputting.

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

    Edmunds Moderator

  • alexlee99alexlee99 Posts: 4
    edited May 2016
    I have the same question as picksteve.
    What if someone pays upfront? In this case, if someone pays $6,890 upfront, one doesn't need to consider the MF, right?
    So it will be $6,890 + Tax? and no additional?

    What would be the disadvantage of paying upfron?
    Thank you
  • MichaellMichaell ColoradoPosts: 124,199
    alexlee99 said:

    I have the same question as picksteve.
    What if someone pays upfront? In this case, if someone pays $6,890 upfront, one doesn't need to consider the MF, right?
    So it will be $6,890 + Tax? and no additional?

    What would be the disadvantage of paying upfron?
    Thank you

    If you do a one-pay lease, there is still a money factor involved, but it is often discounted by the bank.

    But, the calculations are the same, then summed for the entire lease term and paid up front.

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • alexlee99alexlee99 Posts: 4
    Generally how much discount the bacnk can offer? any guess?
    Thank you.
  • MichaellMichaell ColoradoPosts: 124,199
    alexlee99 said:

    Generally how much discount the bacnk can offer? any guess?
    Thank you.

    It depends on the brand .. Audi discounts the MF by .00100 for 36 month leases, for example.

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • Thank you for the great article. Few questions: for calculation of the residual value you using MSRP, correct? What about for calculation of depreciation?: What "negotiated price" mean?:the selling price, the total capitalization cost or the net capitalization cost? Here is for example my quote :
    MSRP 38,188
    Discount savings: -4,311
    Vehicle sell:(38,188): 67%

    Access595
    Document Prep Fee: 700
    License/title: 79
    Acquisition fee: 700
    Tax on collected Items ( no idea what this is?): 294.48
    Down/cash cap reduction: -3,113.30
    Rebate: -500
    Net cap: 32,632.41
    --------
    Base payment 357.56
    Monthly tax: 29.14
    24 mo payment: 386.70
    -----
    Down/cash reduction: 3,113.30
    1st payment: 386.70
    Due on delivery: 3,500
    ----
    Rate: 0.0011
    Annual miles: 12,000
    Residual% (38,188): 67%
    Residual amount: 35,585.96
    Tax:8.15%
    This is a quote for 2016 Lexus NX200t, Las Vegas.

    I would appreciate your feedback greatly! Thanks!
  • kyfdxkyfdx Posts: 130,385

    Thank you for the great article. Few questions: for calculation of the residual value you using MSRP, correct? What about for calculation of depreciation?: What "negotiated price" mean?:the selling price, the total capitalization cost or the net capitalization cost? Here is for example my quote :
    MSRP 38,188
    Discount savings: -4,311
    Vehicle sell:(38,188): 67%

    Access595
    Document Prep Fee: 700
    License/title: 79
    Acquisition fee: 700
    Tax on collected Items ( no idea what this is?): 294.48
    Down/cash cap reduction: -3,113.30
    Rebate: -500
    Net cap: 32,632.41
    --------
    Base payment 357.56
    Monthly tax: 29.14
    24 mo payment: 386.70
    -----
    Down/cash reduction: 3,113.30
    1st payment: 386.70
    Due on delivery: 3,500
    ----
    Rate: 0.0011
    Annual miles: 12,000
    Residual% (38,188): 67%
    Residual amount: 35,585.96
    Tax:8.15%
    This is a quote for 2016 Lexus NX200t, Las Vegas.

    I would appreciate your feedback greatly! Thanks!

    Tax on collected items, is tax on money paid upfront, since it won't be taxed in the monthly payment.
    $595 for accessories? Do you know what that is for?
    $700 doc prep fee? Seems excessive.

    I calculate the same payment.
    If you only paid the first payment at lease signing, the payment would be $525/mo. (the true monthly cost of the lease)

    Have you thought about a little longer term? You could save some money.
    The savings is actually higher, because you amortize your upfront money over more months.

    27/12 payment: $366.35/mo. (66% residual)
    36/12 payment: $358.07/mo. (60% residual)

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

    Edmunds Moderator

  • What's missing from these steps, as well as the Edmunds calculator, is sales tax on manufacturer to consumer lease incentives depending on zip code. I've always paid tax on cap cost reduction incentives in AZ, I understood the tax to be legitimate on leases but not on purchases.
  • kyfdxkyfdx Posts: 130,385
    plutodite said:

    What's missing from these steps, as well as the Edmunds calculator, is sales tax on manufacturer to consumer lease incentives depending on zip code. I've always paid tax on cap cost reduction incentives in AZ, I understood the tax to be legitimate on leases but not on purchases.

    In our experience, consumer rebates are almost always taxed, lease or buy.

    The math on a purchase is different, and obscures that, somewhat.

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

    Edmunds Moderator

  • camnquinncamnquinn Lynchburg, VA 24502Posts: 4
    hi there. i am about to lease my 3rd kia. my lease is up march 2017. i have a 2014 yellow kia soul + in excellent condition with only 12, 200 miles on it. I am wanting to know what exactly you recommend i do so i can get a great deal with no money down? my first time i put down some cash and a car. my second time i didn't put anything down but my price went up greatly and i would think i dont have to do that this time as again, i should have some equity with such low mileage? help
  • kyfdxkyfdx Posts: 130,385
    camnquinn said:

    hi there. i am about to lease my 3rd kia. my lease is up march 2017. i have a 2014 yellow kia soul + in excellent condition with only 12, 200 miles on it. I am wanting to know what exactly you recommend i do so i can get a great deal with no money down? my first time i put down some cash and a car. my second time i didn't put anything down but my price went up greatly and i would think i dont have to do that this time as again, i should have some equity with such low mileage? help

    To realize any equity, you are probably better off trading before the lease is up.
    Step #1 is to find out if you actually have any equity.

    Call Kia Finance for your payoff
    Ask in this discussion for the value of your vehicle:
    https://forums.edmunds.com/discussion/1212/general/x/real-world-trade-in-values#latest

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

    Edmunds Moderator

  • kenny_h_kenny_h_ Posts: 127
    When you lease from a dealer in XYZ city or County, but you live in ABC, do you pay taxes based on where you leased your car, or where you live? Because that can make a big difference in expensive vehicle.
    Thank you.
  • MichaellMichaell ColoradoPosts: 124,199
    kenny_h_ said:

    When you lease from a dealer in XYZ city or County, but you live in ABC, do you pay taxes based on where you leased your car, or where you live? Because that can make a big difference in expensive vehicle.
    Thank you.

    The taxes are based on the address on the registration.

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • Mevans_2Mevans_2 Posts: 10
    Is the MF and Residual % based on the zip you live in or the zip you lease from. Say I live in KY but the deal is in FL.
  • MichaellMichaell ColoradoPosts: 124,199
    Mevans_2 said:

    Is the MF and Residual % based on the zip you live in or the zip you lease from. Say I live in KY but the deal is in FL.

    Generally, it's based on the dealer ZIP code.

    But, it also depends on what brand you are interested in.

    Did you get a good deal? Be sure to come back and let us know! Post a pic of your new purchase or lease!


    MODERATOR

    2015 Subaru Outback 3.6R / 2014 MINI Countryman S ALL4

  • Mevans_2Mevans_2 Posts: 10
    The dealer can fudge MF, right? Can they fudge residual?
  • kyfdxkyfdx Posts: 130,385
    Mevans_2 said:

    The dealer can fudge MF, right? Can they fudge residual?

    Residuals cannot be altered.

    Money factor depends on the make.

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

    Edmunds Moderator

  • Mevans_2Mevans_2 Posts: 10
    GMC?
  • kyfdxkyfdx Posts: 130,385
    Mevans_2 said:

    GMC?

    Yes, GM dealers can markup the money factor, but it is not a common occurrence.

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

    Edmunds Moderator

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