# How to calculate car leasing payments

Car leasing is an excellent alternative to buying a car. It enables you to drive a brand new car every couple of years without actually committing to any long term obligations. There are many companies providing cars on lease and you can get anything from the regular models to the high end luxury cars like Mercedes, BMW, Audi etc. All the maintenance and repair issues are taken care of by the car lease company. At the same time, the company also provides a replacement vehicle till the time that your car is being worked upon.

Calculate the payments yourself

However, there are some things that you need to keep in mind while leasing a car so that you don’t end up with the short end of the stick in the deal. For instance, the car lease company will provide you a calculation of the monthly payments that you need to make. However, you should make the effort to calculate these payments yourself in order to make sure that you are not paying more than you need to.

The steps you should follow to calculate the monthly payments

• First of all gather all the necessary figures required to calculate the lease payments. The MSRP of the car, the interest rate, the money factor that the lease is based on, the term of the lease and the residual value which the lease is based on. All these factors need to be ascertained in order to calculate the monthly payments that you need to make for the lease of the car. You can find this information on the internet or from the car lease company staff itself.

• Calculate how much of the car value will be utilised by multiplying the MSRP by the residual value and subtracting this result from the negotiated price of the car. IF the MSRP is $20,000 and 50% is the residual value while the negotiated price is $18000 then you will end up using $8,000 of the value of the car.

• The amount of the car value should be broken down into monthly payments by dividing it by the number of months which is the duration of the lease. If we continue with the above example and the lease term is taken to be 36 months then the monthly payment will be $8000/36=$222.22

• The interest on the loan should be calculated by adding the negotiated price of the car and the residual value and then multiplying the result by the money factor. In the earlier mentioned example of Car Leasing let us assume the money factor to be .003.In that case the calculation will be (20,000+18,000)x.003=114. The interest portion of the monthly payment will be $114.

• The monthly lease payment can be calculated by adding the two portions together less taxes and additional fees 222.22+114 = $336.22.

• Sales tax also needs to be added to this amount and the final amount can be calculated by multiplying the monthly lease payments by the sales tax and add the result to the monthly lease payment.

• Add in any fees, security deposits and down payments in your calculations for a more accurate estimate.

Published at: Recent Health Articles – http://recenthealtharticles.org