1. What is the Lease Cost Calculation?

The lease cost calculation determines the monthly payment for a vehicle lease by accounting for depreciation and financing costs. It helps consumers understand and compare lease offers.

2. How Does the Calculator Work?

The calculator uses these equations:

Where:

• \( Dep \) — Depreciation ($/month)
• \( Fin \) — Finance fee ($/month)
• \( MP \) — Monthly payment ($)
• \( CC \) — Capitalized cost ($)
• \( RV \) — Residual value ($)
• \( T \) — Term (months)
• \( MF \) — Money factor (decimal)

Explanation: The depreciation is the vehicle's value loss divided by lease term. The finance fee is essentially the interest charge based on the money factor.

3. Importance of Lease Cost Calculation

Details: Understanding lease costs helps consumers negotiate better terms and compare lease offers from different dealers. It reveals the true cost components of a lease.

4. Using the Calculator

Tips: Enter the negotiated vehicle price (capitalized cost), residual value from lease terms, lease duration in months, and money factor (often provided as 0.00xxx).

5. Frequently Asked Questions (FAQ)

Q1: How do I find the money factor?
A: The money factor is sometimes disclosed in lease agreements. If given as 0.00xxx format, divide by 2400 to get approximate APR equivalent.

Q2: What's a good money factor?
A: Lower is better. Current competitive rates range from 0.0010 to 0.0025 (equivalent to 2.4%-6% APR).

Q3: How is residual value determined?
A: The leasing company sets residual values based on projected future value, typically 50-60% of MSRP for 36-month leases.

Q4: Can I negotiate the capitalized cost?
A: Yes, this is the negotiated price of the vehicle plus any fees/options you choose to capitalize.

Q5: Why does the finance charge use (CC + RV)?
A: This accounts for the average amount financed over the lease term as the balance decreases from CC to RV.