1. What is the Lease Payment Formula?

The lease payment formula calculates the monthly cost of leasing a vehicle. It consists of two main components: depreciation (the vehicle's value loss during the lease) and finance fee (the cost of borrowing money for the lease).

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

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 formula accounts for both the vehicle's depreciation over time and the financing costs, combining them to determine the total monthly payment.

3. Importance of Lease Payment Calculation

Details: Understanding lease payments helps consumers compare lease offers, budget effectively, and negotiate better terms with dealers.

4. Using the Calculator

Tips: Enter the negotiated vehicle price as capitalized cost, the lease-end value as residual value, lease duration in months, and the money factor provided by the dealer.

5. Frequently Asked Questions (FAQ)

Q1: How is money factor different from interest rate?
A: Money factor is essentially the interest rate divided by 2400. To convert money factor to APR, multiply by 2400.

Q2: What's a good money factor?
A: Rates vary, but generally below 0.0020 is good for prime borrowers. Manufacturer-subsidized leases may offer lower rates.

Q3: How is residual value determined?
A: It's set by the leasing company based on projected value at lease end, considering make, model, term, and mileage allowance.

Q4: Can I negotiate the capitalized cost?
A: Yes, this is the negotiable "price" of the vehicle in a lease, just like when buying.

Q5: What additional costs aren't included in this calculation?
A: This doesn't include taxes, registration, acquisition fees, or optional add-ons that may be part of the total monthly payment.