Calculate Your Own Lease Payment!

Calculate Your Own Lease Payment!

There are several factors involved in calculating an auto lease payment. Although it is easy and straightforward, the number of steps you need to follow could be quite overwhelming. But, if you have the patience and you take each step one at a time, you will be able to get through the calculation easily. To begin with, the lease payment could be divided into three components. First, the amount you pay for the vehicle usage differs from the value of the vehicle before and after its lease. This difference is coined as the depreciation value over the lease term.

Second of all, a lease is considered similar to a loan. And lastly, just like a car purchase, the lease would also come with the required sales tax. Even while the process of deducting the sales tax may differ, it’s ultimately going to cost you. Therefore, the auto monthly lease is a combination of the sales tax charge, interest rate and the depreciation charge.

The Lease Initial Balance

To calculate the initial balance, you can start by adding up all that is included in the lease. The initial balance should ideally begin with the amount you need to pay for the vehicle. Following this, all other factors should be added. A few of these additions include service agreements, accessories, any handling charge and the delivery fee. In addition, you may also want to consider the acquisition fee that tags along with every lease.

If you actually think about it, lease terms or the process in general are not that complicated. It’s the terminology that includes some technical and complex terms that may end up confusing you. For example, the total cost of the lease could be either called the gross capitalized cost or capitalized cost.

The next step would be to add up all costs on the lease. This would help calculate the lease balance. Factors or elements that might reduce the balance include trade-in equity, rebates and any cash payment that goes toward reducing the lease payment. The term used for such factors that reduce the lease balance is termed as capitalized cost reduction.

The initial balance is, therefore, calculated after having subtracted the capitalized cost reduction from the gross capitalized cost. The recognized term for the initial balance on the lease is seen as the adjusted capital cost.

End Value of the Lease

This value helps a leasing company understand the value of the vehicle toward the end of the lease along with the vehicle mileage. Residual value is the accounting term coined for the end value of the contract or lease. The residual value is the ultimate value that helps a leasing company understand the worth of the car, especially for a wholesale auction.

These terms and concepts can sometimes be confusing but make sure to take the time to understand them thoroughly before striking a deal. If you deem it necessary, make sure to get in touch with a professional with sufficient expertise in the field.