Car Lease Payment Structures That Pay Off

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November 9, 2016

Learn how to evaluate and choose the best car least payment structures with a few simple calculations.

Consumers seeking car lease payment structures that pay off in the end need to understand a few factors that contribute to determining what that payment will be. Price is a key factor, and the only one determining a payment structure that both you and the dealer can control. Price is the only negotiable factor when it comes to payment calculation. Therefore, negotiating a price as close to the Manufacturer's Suggested Retail Price (MSRP) is important. However, to get the best car deal possible, you first need to get a rough idea of what your lease payment will be for a particular car.

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How to Get to a Number
It is impossible for anyone to calculate a lease payment down to the penny because if the lease is subsidized by the manufacturer, there will be a number of "hidden" factors that won't allow an exact determination. But, you can ballpark the figure arriving at a suitable estimate using the following formula based on a $23,000 priced car for a three-year lease. Here's what to do:

  • Get the MSRP of your selected vehicle at CarsDirect
  • Determine the money factor. Call your dealer or credit union to get the money factor on a particular interest rate. Convert the interest rate to a money factor by dividing it by 2,400. So, a 9 percent interest rate would be a money factor of .00375
  • Select a 36-month lease term
  • Get the residual car value from the dealer or bank. A typical car residual value for a 36-month lease would be between 50 to 58 percent of MSRP

Make the Calculation
You've done an excellent job negotiating your price from $23,000 down to $20,000. Your residual value is 57 percent while your interest rate is at 9 percent. So, what will your monthly payments be for three years, or 36 months?

  • Determine the residual value in dollars by multiplying the MSRP ($23,000) with the residual value of 57 percent. $23,000 x .57 = $13,110
  • The car will be worth $13,110 at the end of the lease. Since you negotiated the price to $20,000, and the end value is $13,110, use $6,890 as the car value. $20,000 - $13,110 = $6,890
  • Divide $6,890 by the lease terms of 36 months for a monthly payment of $191.39
  • You need to add the interest and tax into the equation. Take your negotiated price, add it to the residual value and then multiply it by the money factor. $20,000 + $13,110 x .0037 = $122.50
  • Add the two figures of $191.39 and $122.50 to get your approximate best monthly lease payment. $191.39 + 122.50 = $313.89

This figure doesn't take into consideration any taxes, other fees or any down payment. With a down payment, reduce your negotiated price by that amount.

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