Calculate Your Own Lease Payment!
Calculating the car lease payment is actually quite simple unless you choose to complicate it. If you’ve already worked out the time value of annuities and lump sums on their present value, then you will find it easy to follow the article. If you haven’t, make sure to read up a bit before you go further.
You may want to understand that there are certain leases that will call for advance payments when signing the contract. Calculating the advance payment could come across as complicated, but it will help you out if you studied a bit or two about the regular payment. Lease payments will be carried out over a period of twelve months.
This is understood as the value of the leased asset at the time the lease contract is being signed. Inclusive of the residual value, it makes up for the present value of the payments that are to be made in the future on the lease.
This refers to the total asset value toward the end of the lease. For most auto leases, the individual will be left with the option of investing in the asset when the lease is up. For example, let’s say that when the lease has ended in three years, the residual value of the auto lease amounts to $15,000. At this time, you would have the option to invest in the vehicle for $15,000. If you do not choose to invest at this point however, then the vehicle would be given to the lessor.
Sometimes you may also need to make an advance payment when signing the contract. For example, the lease amounts to two advance payments with a monthly payment of $300. Having signed the lease, you would then be subjected to two payments ($600) and then your first regular payment of $300 would be due in a month’s time.
Monthly Lease Payment Calculation
Assuming that you have no advance payments to make, calculating the regular payment isn’t that complicated. The lease is seen through a monthly payment and the residual value. For example, let’s say that the lease amounts to $3,500 while the residual value amounts to $1,000. Your monthly payment would be subjected to $123.
If you would like to calculate it yourself, you need to keep in mind the following steps:
Begin by calculating the monthly depreciation. The formula works as Capital Cost-Residual Value divided by the number of months.
You have to start calculating the monthly finance charge as the next step. This is done by adding the capitalized cost with the residual cost along with the interest rate.
The lease payment is then calculated by adding up the finance charge to the depreciation cost.
Make sure to also add the additional fees, add-ons and other charges to this amount.
Make sure to get all your facts right before making any decision. Speak to a professional if the need arises but do not sign a contract with a puzzled mind.