How to calculate your lease payment

To make it easier to make a effective decision you need to understand how to calculate your lease payment
most of us however shy away from the “complicated” maths that appear on our lease contracts, leaving it up to the dealer to do the payment formula. In reality however its not that difficult! Once you understand all the figures involved in calculating your monthly payments, everything slots into
place.

These key figures are:

MSRP. This term is short for the Manufacturer’s Suggested Retail Price:
This is the list price of the vehicle or the window sticker price Money Factor:

This is what determines the interest rate on your lease.Ensure your chosen dealer discloses this rate before entering into the lease.

Car Leasing Short Term: This is the length of time in months the dealer rents the vehicle.
Residual Value: The value of the vehicle at the end of the lease.This figure needs to be obtained from the dealer.

See below an example of a lease payment based on a vehicle with an MSRP (sticker price) value of £20,000 and a money factor of 0.0034 (this would as a rule be quoted
3.4%). This particular scheduled-lease is based on 3 years and the estimated residual percentage is 55%.

The Initial step is to calculate the residual value of the short car lease. This is gained by multiplying the MRSP by the residual percentage:

£20,000 X .55 = £11,000.

In this example the car will be worth £13,750 at the end of the lease, so the next step would be :

£20,000 – £11,000 = £9,000

The amount of £9,000 will be used over a 3 year lease term so to calculate the monthly payment:

£9,000 / 36 = £250.

The first part of the monthly payment calculated is called the monthly depreciation charge.

The second part of the monthly payment, is called the money factor payment,and factors in the interest charge. It is calculated by adding the RP figure to the sidual value and then multiply this by the money factor:

(£20,000 + £11,000) * 0.0034 = £105.4

In conclusion, we get the approximate monthly payment by adding the two figures:

£250 + £105.4 = £355.4

So to recap , the example formula looks like this:

1- Monthly Depreciation Charge:

MSRP X Depreciation Percentage = Residual Value
MSRP – Residual Value = Depreciation over personal car leasing term
Depreciation over lease term / lease term (number of months in the lease) = monthly depreciation charge

2- Monthly factor money charge

(MSRP + Residual value) X Money factor = money factor payment

3- Sample Monthly Payment: depreciation charge + money factor payment = monthly payment

You need to Bear in mind that this is a simplified calculation that does not take into account Incentives,taxes or any other fees.
This calculation enables you to gain a rough idea what your lease payments for the vehicle in question are likely to be.