How to Calculate Lease Repayments

Leasing a car or truck is very common. Many people find that leasing has more of a benefit than purchasing because after the lease agreement is up you can sign a new lease for a new vehicle. The car you drive is rarely more than four years old with a lease. Plus, at the end of the lease if you don't like the car you can sign a lease with any other car you like. It is essential to calculate the lease repayments before signing a lease to determine if the vehicle is affordable with your budget.

Things You'll Need

• MSRP
• Interest rate
• Lease term
• Residual value

Instructions

1. Find the residual value of the car. This is the value of the car after the lease is completed. The value for different cars will depreciate faster than others but you can use an average 15 percent value loss per year. Multiply the MSRP by the residual value percentage of 55 percent (for three years).

2. Find the depreciation of the car over the term of the lease. Subtract the invoice price minus the residual value.

3. Calculate the monthly depreciation payment by dividing the depreciation amount by the term.

4. Add the invoice cost to the residual value. Multiply the result times the interest rate. The results give you the money factor payment portion.

5. Find the bottom line monthly lease payment by adding the monthly depreciation plus the money factor payment portion.

6. Find the tax by multiplying the monthly lease payment by state sales tax where you will be leasing the vehicle.

7. Add the tax amount results to the monthly lease payment amount.

Tips & Warnings

• This is only as estimate of the lease repayments. The final number may be plus or minus $20 from the actual lease payments. Read all lease agreements thoroughly before signing.

References

• Edmunds: Calculate Your Own Lease Payment