Auto Lease Calculator Calculate Monthly Auto Lease Payments

Auto Lease Calculator

An auto lease calculator can be used to find the periodical cash outflow in the form of a lease. Lease includes depreciation as charge, interest payment as charge, and sometimes there could be sales tax, but we shall ignore it here as taxes vary across the region.

The formula for calculating Auto Lease as per below:

Auto Lease

[(C – R) / L + (C + R) x M]

C is the capitalized cost
R is the residual value at end of lease term
L is the term of lease period
M is the money factor which can be calculated as APR / 2400

Wherein,

C is the capitalized costR is the residual value at the end of the lease termL is the term of the lease periodM is the money factor, which can be calculated as APR/2400

How to Calculate an Auto Lease?

Auto Lease Calculator Examples

Example #1

Mr. Amitabh wants to buy a car that costs around $45,000, but since it’s out of his budget, he decides to take it on loan or lease it out since he wants to drive the car for a couple of years. He tries for a loan, but he is denied the loan due to a lower credit score. Later, he meets a friend who tells him that he can take it on lease and promises to help in getting a lease.

First, determine the capitalized value of the vehicle, which can be calculated as the agreed-upon value of the vehicle less any down payment made less any trade-in value. Subtract a residual value from the value arrived in step 1. Now, we need to CalculateThecalculate deprecation[/wsm-tooltip], which can be calculated by dividing the value arrived in step 2 by the lease term, which shall be a periodical deprecation charge. Convert the APR, expressed in percentage, into a money factor by dividing it by 2400. Sum up the value arrived in step 1 with residual value and multiply the result by a money factor calculated in step 4. The result would be a periodical interest charge. Take the total of values arrived in steps five and 3, which shall be the total periodical outflow via lease payment.

On inquiry, the car could be leasable for three years with an agreed-upon price of $43,000 after negotiating with the dealer. The residual value of the agreement was $10,500. Mr. Amitabh has to make a down payment of $3,000. There is no trade-in value. The APR rate is 5%.

Based on the given information, you must calculate the monthly lease payments to be made by Mr. Amitabh.

Solution:

We can use the below formula to calculate the monthly lease payment.

Note: These shall be calculated in two parts below.

First, we shall calculate the capitalized value for the lease, which is nothing but Agreed Value less any down paymentDown PaymentDown payment is the initial deposit made by the buyer to the seller when purchasing an expensive item, such as residential property or a car. It comprises a portion of the total purchase amount of the asset and takes place via cash, bank check, credit card, or online banking.
read more less any trade-in value.

Capitalized value (C) = $43,000 – $3,000 – $0

= $40,000

The second would be to calculate the Depreciation charge.

Depreciation Charge = (C – R) / L

= ($40,000 – $10,500) / 36

= 29,500 / 36

= 819.44

Next would be to calculate interest.

The money factor can be calculated as APR / 2400, which is 5% / 2400 which is equal to 0.0021

Interest Charges = (C + R) x M

= (40,000 + 10,500) x 0.0021

= 105.21

The total monthly lease payment shall be the sum of depreciation charge and interest charge, which is 819.44 + 105.21, which is equal to 924.65

Example #2

Suppose that a car can be leased for two years and where the agreed-upon value is $22,000, where the lessee would be required to make a down payment of $3,000, and the lessee is trading in his old car for the value of $1,000. The residual value agreed upon is $3,500. The APR for this lease is 6%. You are required to calculate monthly lease payments based on the given information.

Monthly lease payment = [(C–R)/L+(C+R)*M]

Capitalized value (C) = $22,000 – $3,000 – $1,000

=$18,000

= ($18,000 – $3,500) / 24

= 14,500 / 24

= 604.17

The money factor can be calculated as APR / 2400, which is 6% / 2400 which is equal to 0.0025

= (18,000 + 3,500) x 0.0025

= 53.75

The total monthly lease payment shall be the sum of depreciation charge and interest charge, which is 604.17 + 53.75, which is equal to 657.92

Conclusion

Auto Leases can calculate monthly lease payments, including depreciation and interest charges. However, there would be certain restrictions and limitations placed on the lesseeLesseeA Lessee, also called a Tenant, is an individual (or entity) who rents the land or property (generally immovable) from a lessor (property owner) under a legal lease agreement. read more on the use of vehicles like speed limitations and kilometer driving limitations, which shall not be the case in a loan or when the vehicle is purchased in cash as the borrower himself is the owner which is not in case of a lease.