1. What is the Lease Payment Formula?

The lease payment formula calculates the monthly payment for an 18-month vehicle lease. It accounts for the vehicle's capitalized cost, residual value, and the money factor (which represents the interest rate).

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

Where:

• \( Capitalized\ Cost \) — Negotiated price of the vehicle plus any additional fees
• \( Residual\ Value \) — Estimated value of the vehicle at lease end
• \( Money\ Factor \) — Lease interest rate (decimal)
• \( 18 \) — Fixed term length in months

Explanation: The first part calculates the monthly depreciation, while the second part calculates the monthly finance charge.

3. Importance of Lease Calculation

Details: Accurate lease payment calculation helps consumers compare lease offers, budget appropriately, and negotiate better terms with dealers.

4. Using the Calculator

Tips: Enter the capitalized cost in dollars, residual value in dollars, and money factor as a decimal (e.g., 0.00125). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good money factor?
A: Money factors typically range from 0.0010 to 0.0040. Lower is better. Multiply by 2400 to approximate the equivalent annual interest rate.

Q2: How is residual value determined?
A: The leasing company sets residual values based on the vehicle's expected depreciation over the lease term.

Q3: Can I negotiate the capitalized cost?
A: Yes, this is the vehicle's purchase price and can often be negotiated downward from the MSRP.

Q4: Why is the term fixed at 18 months?
A: This calculator is designed specifically for 18-month leases, which are common for short-term leasing.

Q5: Are taxes included in this calculation?
A: No, this calculates the base payment before taxes and fees, which vary by location.