HOW MUCH DOES IT COST TO LEASE A CAR?

Leasing a car comes with many questions, among which ‘how much does it cost to lease a car’, is the top one. Car leasing calculator will help you getting into a lease deal because sometimes it may seem a bit confusing because all of the numbers accompanied by some particular lease vocabulary. Read our guide on how does car leasing work to get an understanding of all details.

Calculating your first lease deal accurately is very difficult on your own. Taxes and fees will vary by region, and add-on fees can vary from model to model. And no matter how hard you try, you’re almost guaranteed to leave some charges out of your attention. We prepared the guide to use the car leasing Calculator. In case you don’t feel like reading and researching more, let our lease expert explain to you all the details and offer the Free Quote for your car.

a woman's hand with red nails holding a pen on top of the calculator
How much does it cost to lease a car?

What is included in the car lease calculator?

The calculation of your monthly lease payment includes many figures. Some of them are negotiable, others are set by the company or bank, and others are up to you.

However, there are four main aspects to know how much does it cost to lease a car:

  • Capitalized cost of the car (sale price)
  • Residual value (predicted resale value of the car at the end of the lease)
  • Money factor (interest rate)
  • Lease term (length of the lease)

Capitalized cost

The cap cost includes the negotiated price of the vehicle plus any additional fees or taxes that will be financed. Even though you’re not actually buying the car, you can negotiate the sale price to lower your monthly payment.  You can make your monthly payments smaller with a help of cap cost reduction or down payment. It also can be lowered with a help of other possible aspects like money factor or your credit score.

Residual value

This is also known as a resale value. It’s what the car is worth at the end of the lease and it’s set by the lender, so you can’t negotiate it. It is a good idea to lease a car with a high residual value as the vehicle doesn’t depreciate much.

Here’s why: when you lease a car, you pay for its depreciation. If your new car is worth $30,000, and its residual value after three years is $15,000 (or 50%) you have essentially used $15,000 of value. But if that same car is worth $18,000 (60%) after three years, you have used only $12,000 of its value. With a higher resale value, you save your money since you pay only for the value you use.

Typically the residual value is between 50% and 60% for most cars. If you are willing to have the exact information on the make and model you want, click here to contact your personal lease expert.

Money factor

This is a financing cost, which is very similar to the traditional notion of the interest rate. In a monthly lease calculation, the money factor is converted to a decimal so interest on the monthly payment can be computed. So 3% interest would be written as 0.00125 as a money factor. (You can convert an interest rate to a decimal by dividing it by 2,400: 3/2,400 = 0.00125. In the same manner, you can convert a lease factor to an interest rate by multiplying it by 2,400.)

Further the money factor you get in your lease deal is based on your credit score. You may use a rate between 2% and 5% if you have strong credit, between 6% and 9% for average credit, and between 10% to 15% for poor credit. A score of 620 and more is typically regarded as a “good” one. Although if you have not gained this score it doesn’t necessarily mean that you are not eligible to apply for a lease. Grand Prix Motors will provide a choice of options for your particular car and offer the best deal. Contact your personal lease expert right now to get a free consultation.

Lease term

This is the period of time you agree to lease your vehicle. Car leases usually last 36 months, but it is a very flexible thing to discuss with your assistant and fit your needs. You get your auto for the first trouble-free years and most extended warranties last for about three years. This means you don’t have to pay extra for extended coverage, and your cost of maintenance will be low since the car is new. 

Let’s have a look at how the car lease calculator of your first lease works on the example. Additionally if you feel that some terms are not clear, check our post about the car lease terminology.

We’re going to take an example of the car you will be leasing with the manufacturer’s suggested retail price (MSRP) of $27,000. Let’s say that you agreed on the capitalized cost of $25,000.

Certainly, we will keep things simple not including any down payment and you don’t have a trade-in. The lease term will be very usual as for 36 months. The money factor is .0029, and the leasing company has predicted the residual value to be $12,500 at the end of 36 months.

Capitalized Cost$25,000
Residual Value$12,500
Money Factor.0029
Lease Term36 months

Now let’s analyze how much does it cost to lease a car

Step 1. Depreciation

The depreciation cost is the largest part of your future lease. It is quite important and it’s easy to calculate:

Depreciation = (Capitalized Cost – Residual) / Term of Lease

($25,000 – $12,500) ÷ 36 = $347

We have the first item for our ultimate calculation: $347 is your monthly depreciation cost.

Step 2. Interest

The next item of the lease payment is interest. The interest payment is calculated focusing on your money factor. The calculation is:

Interest = (Capitalized Cost + Residual Value) × Money Factor

($25,000 + $12,500) × .0029 = $109

Your monthly interest payment is going to be $109.

Step 3. Taxes

Last but not least is taxes that we have to estimate for your monthly lease payments. Here’s the calculation for the New York state:

Taxes = (Monthly Depreciation Cost + Interest) × Local Sales Tax Rate

($109 + $347) × 4% = $18

The final item will cost approximately $18 as your monthly tax payment.

Sum Up The Items to know how much does it cost to lease a car

Now that we have all 3 factors that make up your lease payment, we can add it all together to come up with the final:

Monthly Lease Payment = Depreciation + Interest + Taxes

$347 + $109 + $18 = $474

Your total estimated cost of the whole lease is going to be the monthly lease payments multiplied by the number of months.

Lease Cost = Monthly Lease Payment × Lease Term

$474 × 36 = $17 064

Remember that car lease calculator is very approximate

Now when you are armed with the knowledge of the basics you are ready to calculate your first lease. There are very many different components in a lease contract, which means that your results will vary. Don’t expect to calculate your lease payment to the penny. But if you base your calculation on accurate information, you can get close to the right amount. Also use our Calculator and plug in the figures that best suit your financial situation and lifestyle. If you don’t have enough information about the desired parameters don’t hesitate to get in touch with our lease expert here

#enjoy your freedom with Grand Prix Motors!

Related articles

Sign up to our newsletter.

Hear about the latest offers first, before everyone else.

Get you Free Quote on any Make & Model!

Submit your desired Car and we will contact you shortly.

    X

    GET YOUR FREE QUOTE OR ASK US ANYTHING!

    Request Custom Quote