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Lease Term Equation:
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The Lease Term equation calculates the duration of a lease in months based on the capitalized cost, residual value, and monthly depreciation. It helps determine how long it will take to amortize the difference between the vehicle's initial cost and its projected value at lease end.
The calculator uses the Lease Term equation:
Where:
Explanation: The equation determines how many months are needed to pay off the difference between the vehicle's initial cost and its projected residual value at the given monthly depreciation rate.
Details: Calculating lease term is crucial for financial planning, comparing lease offers, and understanding the relationship between monthly payments and lease duration.
Tips: Enter the capitalized cost (negotiated price of the vehicle), the residual value (projected value at lease end), and the monthly depreciation amount. All values must be positive numbers.
Q1: What's the difference between capitalized cost and MSRP?
A: Capitalized cost is the actual negotiated price of the vehicle, while MSRP is the manufacturer's suggested retail price before negotiations.
Q2: How is residual value determined?
A: Residual value is typically set by the leasing company based on the vehicle's projected value after the lease term, considering mileage limits and wear-and-tear.
Q3: What factors affect monthly depreciation?
A: Depreciation depends on the vehicle's initial cost, residual value, lease term, and sometimes money factor (interest rate).
Q4: Are there typical lease term lengths?
A: Common lease terms are 24, 36, or 48 months, though other terms may be available depending on the lessor.
Q5: Can I negotiate the lease term?
A: While standard terms are common, some flexibility may exist depending on the leasing company and current promotions.