Car Lease Payment Structures That Pay Off

Consumers seeking car lease payment structures that pay off in the end need to understand a few factors that contribute to determining what that payment will be. Price is always a key factor and the only one determining a payment structure that both you and the dealer can control. Price is the only negotiable factor when it comes to payment calculation. Therefore, negotiating a price as close to the Manufacturer’s Suggested Retail Price (MSRP) or sticker price is important. However, to get the best car deal possible, you first need to get a rough idea of what your lease payment will be for a particular car.

How to Get to a Number
It is impossible for anyone to calculate a lease payment down to the penny because if the lease is subsidized by the manufacturer, there will be a number of “hidden” factors that won’t allow an exact determination. But, you can ballpark the figure arriving at a suitable estimate using the following formula based on a $23,000 priced car for a three-year lease. You will be capable of calculating a bottom-line lease to get the very best deal possible.

Here’s What to Do

• Get the MSRP of your selected vehicle by going online to CarsDirect.com.
• Determine the money factor. Call your dealer or credit union to get the money factor on a particular interest rate. Convert the interest rate to a money factor by dividing it by 2,400. So, a 9 percent interest rate would be a money factor of .00375.
• Select a 36-month lease term
• Get the residual car value from the dealer or bank. A typical car residual value for a 36-month lease would be between 50 to 58 percent of MSRP.

Make the Calculation
You’ve done an excellent job negotiating your price from $23,000 down to $20,000. Your residual value is 57 percent while your interest rate is at 9 percent. So, what will your monthly payments be for three years, or 36 months?

1. Determine the residual value in dollars by multiplying the MSRP of $23,000 times the residual value of 57 percent. $23,000 X .57 = $13,110.

2. The car will be worth $13,110 at the end of the lease. Since you negotiated the price to $20,000, and the end value is $13,110, use $6,890 as the car value. $20,000 - $13,110 = $6,890

3. The $6,890 is divided by the lease terms of 36 months for a monthly payment of $191.39.

4. You need to add the interest and tax into the equation by taking your negotiated price and adding it to the residual value and then multiply it by the money factor. $20,000 + $13,110 X .0037 = $122.50.

5. Add the two figures of $191.39 and $122.50 to get your approximate best monthly lease payment. $191.39 + 122.50 = $313.89

This figure doesn’t take into consideration any taxes, other fees or any down payment. Choose a down payment, if desired, and then reduce your negotiated price by that amount. Follow the calculation formula to arrive at a monthly payment structure that will surely pay off well.