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Written by admin
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Thursday, 19 June 2008 21:55 |
 Leasing is nothing more than a method of paying for the use of a car, truck, SUV, or van over a specified period of time. Even if it sounds like renting, it is not. While you can rent a car for as little as a day, or even a few hours, leasing typically starts at 24 months and doesn't provide for easy termination or vehicle swapping.
Automobile leasing is based entirely on the concept that you pay for the amount by which a vehicle's value depreciates during the time you're driving it. Depreciation is the difference between a vehicle's original value (MSRP) and its value at lease-end (residual value), and is the primary factor that determines the cost of leasing. Residual value is determined by the leasing company and it is set for the term of the lease.
Example:
You are leasing Honda Accord EX with MSRP of $23,860
Residual value for 36 month is 52%
Your vehicle's lease-end value would be $12,407.20 (52% of $23,860)
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Last Updated on Tuesday, 08 July 2008 04:22 |
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Monthly Lease Payment Formula |
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Written by admin
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Wednesday, 09 July 2008 00:58 |
 A lease payment is made up of three parts: a depreciation fee, a finance fee, and sales tax - all added together.
1. The depreciation fee portion of your payment simply pays the leasing company for the loss in value of its car, spread over the lease term (number of months), based on the miles you intend to drive and the time you intend to keep the car. You pay off an equal portion of the total expected depreciation each month. This is calculated as follows:
Depreciation Fee = ( Net Cap Cost – Residual ) ÷ Term
Remember, Net Cap Cost is the Gross Cap Cost (selling price you negotiate with the dealer) plus any add-on fees and taxes, and any prior loan balances, minus any Cap Cost Reductions (down payment, trade-in, or rebates). A good lease deal is when you have the lowest possible Net Cap Cost with the highest possible Residual.
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Last Updated on Wednesday, 09 July 2008 01:07 |
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