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How To Calculate Your Let Payment
Understanding how to calculate your monthly rent payment makes it easier for you to make an informed decision. Yet, most of us shy away from the 'complicated' math on our rent contract, leaving it up to the dealer to do the payment formula.
Actually, it's not that difficult! Once you interpret all the figures involved in accounting your monthly payments, everything else falls into place. These key figures are:
MSRP (short for Manufacturer's Suggested Retail Price): This is the list cost of the vehicle or the window sticker price. Money Factor: This determines the interest rate on your lease. Insist on your dealer to disclose this rate before entering into a lease. Lease Term: The number of months the dealer rents the vehicle. Residual Value: The value of the vehicle at the end of the lease. Again, you can get this figure from the dealer.
Now, rent us calculate a sample lease defrayment based on a vehicle with an MSRP (sticker toll) value of $25,000 and a money factor of 0.0034 (this is usually quoted as 3.4%). The scheduled-lease is over 3 years and the estimated residual percentage is 55%.
The first step is to calculate the residuum value of the car. You multiply the MSRP through the residue percentage:
$20,000 X .55 = $11,000.
The car will be worth $13,750 at the end of the lease, so you'll be using:
$20,000 - $11,000 = $9,000
This amount of $9,000 will be used over a 36 month lease period giving us a monthly defrayment of:
$9,000 / 36 = $250.
This is the first part of the monthly payment, called the monthly depreciation charge. The second part of the monthly payment, called the money factor payment, factors the interest charge. It is calculated through adding the MSRP figure to the residue value and multiplying this through the money factor:
($20,000 + $11,000) * 0.0034 = $105.4
Finally, we get the approximate monthly defrayment through adding the two figures together:
$250 + $105.4 = $355.4
To recapitulate, the sample formula looks like this:
1- Monthly Depreciation Charge:
MSRP X Depreciation Percentage = residue Value
MSRP - residual Value = Depreciation over rent term
Depreciation over rent term / let term (number of months in the rent) = monthly depreciation charge
2- Monthly factor money charge
(MSRP + residuum value) X Money factor = money factor payment
3- Sample Monthly Payment:
Depreciation charge + money factor defrayment = monthly payment
Keep in mind that this is a simplified calculation that executes not take into account taxes, fees, rebates or any other incentives. The calculation gives you a ballpark figure or a rough idea of what your rent payments for the vehicle in question should be.
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