By Joe Spirio
Long Island Auto leasing update
Auto lease payments have always been a mysterious series of calculations, that produce a monthly payment often without detectable rhyme or reason, an uncomfortable mathematical blind spot .
Simply by its nature leasing formulas effect different types of cars as if they too knew the difference between Foreign & American vehicles.The simple truth however is that Foreign cars hold their value better and are worth more after several years of use than most other vehicles. This ingredient has the largest single effect on your lease payment.
Your lease payments will be based on the difference between the cost of the car today and its predicted value at the end of the lease. (typically 36 months)
Lets compare two $20,000 cars , one Foreign and one Domestic
The Foreign car after 3 years of driving is still worth 57 % of its original list price producing a residual or future value of $12,000.
The American car after 3 years retains only 45% of its original list price producing a residual value of only $9,900.
Honda $ 21,100.List Price $ 22,000. Dodge
x 57% x 45%
$ 12,027. residual $ 9,900.
$20,000. your cost $ 20,000.
- 000.- money down -000.
$ 12,027.minus residual $9,900.
36 divide by term 36
$ 221.monthly depreciation $280.
Although both cars cost the same initially is soon becomes evident that one will offer a more attractive lease payment.
The monthly depreciation shown above is your payment without tax and interest .We are only half way through the math and already we have a $59. dif.
Taking the calculation to the next step we must factor in the interest.
Honda: $ 20,000 the cost
+ $ 8,000 plus the residual
$ 28,000 = total
multiply this by x .00335 (approx 8% apr)
monthly interest= $ 93.80
add in the monthly + $ 221.00 depreciation.
the total payment is $ 314.80
Can you figure out the Dodge total payment ?
If you came up with $ 380.16 your correct , quite a difference considering both cars cost exactly the same.
HAVE YOU BEEN SHOPPING FOR A NEW CAR ? WOULD YOU LIKE TO CALCULATE YOUR OWN LEASE ?
While you are looking at new cars and interviewing sales people
you need only to gather six ingrdients to calculate your own payment.
1)HIGH LIST PRICE (window sticker before any discounts)
2)YOUR COST (don't forget to add in the bank fee 495.)
3)RESIDUAL VALUE ( usually a % , the longer the term the smaller the %)
4)TERM ( number of months )
5)INTEREST RATE OR RATE FACTOR (usually a decimal ex. .00335
6)BANK FEE ( fee charged by the lender $495. is average)
This method excludes sales tax.To calculate the tax multiply the
payment x the term x the tax rate
ex. 314.80 x36=11,332.80 x 8.25% $934.95 is the sales tax do at inception.A normal lease C.O.D. is comprised of the first payment, a refundable security deposit(payment rounded up to the nearest $25 increment) , the sales tax and 100 for registration.
The total due at inception on this no money down lease is $1,678.75, a bit of a conflict in terminology that you can avoid by using the term total out of pocket , it means just what it says.
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