# How to calculate your lease payment

When you know how much your monthly rent payment will be, it's much simpler to make an educated choice about whether or not to sign the lease. However, the vast majority of us avoid the "complicated" math on our lease contract, instead deferring to the dealer to figure it out.

## Carry out the payment calculation.

In point of fact, it's not that hard at all! When you finally get a handle on all of the numbers that go into determining your monthly payments, everything else starts to fall into place. These are the most important figures:

MSRP stands for "Manufacturer's Suggested Retail Price," and it refers to the vehicle's list price, also known as the price that appears on the window sticker.

The amount of money you have available is a significant factor in determining the interest rate on your lease. Insist that your dealer reveal this rate to you before you sign a lease agreement with them.

A vehicle's lease term refers to the number of months that it is rented from the dealer.

The value of the leased vehicle after the term of the lease has expired is referred to as the "residual value." Again, you can obtain this information by speaking with the dealer.

Now, let us calculate an example lease payment based on a vehicle with a manufacturer's suggested retail price (sticker price) value of \$25,000 and a money factor of 0.0034 (this is typically quoted as 3.4%). The duration of the scheduled lease is three years, and the estimated percentage of residual value is 55.

The first thing that needs to be done is to calculate out how much the car is still worth. You multiply the Manufacturer's Suggested Retail Price by the Residual Percentage:

\$20,000 X .55 = \$11,000.

At the conclusion of the lease, the value of the vehicle will be calculated based on the following factors:

\$20,000 – \$11,000 = \$9,000

This total of \$9,000 will be used over the course of a lease agreement that is for a period of 36 months, giving us a monthly payment of:

\$9,000 / 36 = \$250.

The monthly depreciation charge represents the initial portion of each month's payment and is referred to as such.

The interest charge is factored into the second portion of the monthly payment, which is referred to as the money factor payment. The formula for determining it involves adding the figure representing the original MSRP to the figure representing the residual value, and then multiplying this result by the money factor:

(\$20,000 + \$11,000) * 0.0034 = \$105.4

Adding these two numbers together gives us an approximation of the monthly payment, which is as follows:

\$250 + \$105.4 = \$355.4

In brief summary, the model equation looks like this:

### 1. The Cost of Depreciation Each Month:

MSRP X Depreciation Percentage = Residual Value

Depreciation over the course of the lease is equal to the MSRP minus the residual value.

Depreciation over the course of the lease term divided by the length of the lease (in terms of the number of months) equals the monthly depreciation charge.

### 2. The cost of the monthly factor money

(MSRP + Residual value) X The money factor is equal to the payment for the money factor

### 3. Examples of a Monthly Payment:

Monthly payment equals charge for depreciation plus payment for money factor.

Please keep in mind that the calculation presented here is an oversimplification that does not take into account any taxes, fees, rebates, or other types of incentives. The calculation will provide you with a general estimate or a ballpark figure for the monthly lease payments that should be expected for the vehicle in question.

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