1. What is the Lease Buyout Formula?

The lease buyout formula calculates the monthly payment to finance the residual value of a leased vehicle at the end of the lease term. It helps determine if buying out your lease makes financial sense compared to other options.

2. How Does the Calculator Work?

The calculator uses the lease buyout formula:

Where:

• \( MP \) — Monthly payment ($)
• \( RV \) — Residual value ($)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Loan term (months)

Explanation: The formula calculates the fixed monthly payment needed to pay off the residual value over the loan term, including interest.

3. Importance of Lease Buyout Calculation

Details: Calculating your lease buyout helps compare financing options, budget for monthly payments, and decide whether buying out your lease is financially advantageous.

4. Using the Calculator

Tips: Enter the residual value from your lease contract, the annual interest rate offered for financing, and the desired loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I buy out my lease?
A: Consider buyout if the residual value is below market value, you want to keep the car, and financing terms are favorable.

Q2: What's a good interest rate for lease buyout?
A: Rates vary, but generally under 5% is good for excellent credit. Compare with new car loan rates.

Q3: Can I negotiate the residual value?
A: Typically no - residual is set in the lease contract. But you may negotiate the buyout price in some cases.

Q4: Are there fees involved?
A: Yes, expect purchase option fees, taxes, registration, and possibly dealer documentation fees.

Q5: Should I get gap insurance?
A: Recommended, as your lease gap coverage ends when you buy out the vehicle.