The lease calculator can estimate your monthly car payment if the interest rate is known or the actual interest rate paid if the monthly payment is given. Everything there is to know on how to deal with your car leasing is detailed below the form.


Loan amount: *
$
Residual value: *
$
Lease term: *
M
Interest rate: *
%
Loan amount: *
$
Residual value: *
$
Monthly payment: *
$
Lease term: *
M

What does lease represent?

A lease is a written agreement between two parties: one is the renter, called as lessee, while the other one is the owner of the good (subject of the lease) which is called the lessor. By this agreement the lessee obtains the right to use the good owned by the lessor while being obliged to make regular payments over a certain period of time to the lessor. The regular payments usually cover two parts: one is the money amount representing the good’s market value being financed and the other part consists in the interest that the renter agrees to pay as it is the cost of financing.

This transaction is one of the most used around the world when renting a house or leasing a car. The term of the agreement is negotiated between the lessor and lessee. It can vary from few weeks or months to few years, and also depends on the lease type: while when taking a car by lease, most of the creditors request signing a two year agreement, in case of real estate the owner requests signing the agreement for a longer period due to the amount covered by the contract.

A lease proves to be advantageous and protective for both sides. The lessee not only receives the good to use from the beginning, but also knows that he has full rights to that good during the lease, until the contract expires. On the other hand, the lessor is protected by the contract that obligates the renter to make the regular payments during the contract.

What is car leasing?

Even though the concept of a lease was explained above, let’s define the car leasing which is a specific agreement signed by a lessee and a lessor for a term that varies in months and/or years, in order to a finance an auto under specific conditions.

Usually before a car finance through this kind of transaction, the renter should make a thoroughly research of all the car lease deals because of few major reasons:

a) First is that you need to get a clear image of its costs meaning not only the monthly costs but all the one time fees and/or ending costs.

b) Second is that you need to have a clear image of the general terms of conditions the renter should comply and which are the costs to finance the usage of the car.

c) Third is that you need to have a clear image of the total paid in case of a lease in order to compare its costs with other financial options you may have. For instance after a thoroughly research you may decide that is better to buy a new car by your savings rather than accepting such terms and conditions.

d) Fourth is that you need to know exactly which are the best up to three deals on the market, so that you choose the best one at the end.

Apart from using this lease calculator to get a quick image of your payments or interest paid, the terms and conditions you should have clear before contracting a car lease are related to the following aspects:

- Price of vehicle;

- Term (usually in months);                  

- Destination charge;

- Dealer preparation charge;

- Trade-in allowance;

- Factory rebate (only if used to reduce cap cost);

- Residual value at the end of the term;

- Monthly administrative fee where the case;

- Acquisition fee;

- Gap insurance fee;

- Security deposit;

- Down payment amount;

- Prepaid excess mileage cost;

- License and registration fees;

- Disposition fee at the end of the term.

How does this lease calculator work?

This car finance tool provides two methods to calculate your lease, each method having its own tab as explained below:

  • First tab is designed to calculate lease by fix rate and takes account of the following fields:

- Loan amount which is the good’s market value (subject of the lease);

- Residual value – represent how much the good is worth at the end of its term;

- Lease term – is the period in months;

- Interest rate.

By using this method the lease calculator returns three figures by applying the algorithm and formulas presented below:

- The monthly payment that the renter has to make on a regular basis. Its formula is:

Monthly payment=(LAA*RDP/1200*(1+RDP/1200)^TLA-RVA*RDP/1200)/((1+RDP/1200))^TLA-1)

- Total paid within the Lease term – is the total cost that the lessee will have with the lessee. Its formula is:

Total paid=Monthly payment obtained above*Loan term.

- Total interest paid – is the total amount of interest that the lessee pays to the lessor. Its formula is:

Total interest paid=Total paid – Loan amount + Residual Value.

  • Second tab is designed to estimate lease by a fix payment and requires you to know the following fields:

- Loan amount – is the good’s market value (subject of the contract);

- Residual value – represent how much the good is worth at the end of its term;

- Monthly payment – represent the amount of money that the lessor agrees to pay on a monthly basis;

- Lease term – is the time in months.

By using this second method the tool returns three figures:

- The interest rate that can help the lessee decide whether the offer is a competitive one or not. Its formula is:

Interest rate=(2*(TLA*MPA-LAA+RVA))/(TLA*(LAA+RVA)*1200. Please note that the resolution of this formula requires you to apply the Newton-Raphson method.

- Total paid within the Lease term – is the total cost that the lessee will have with the lessee. Its formula is:

Total paid=Monthly payment specified within the form*Loan term.

- Total interest paid – is the total amount of interest that the lessee pays to the lessor. Its formula is:

Total interest paid=Total paid– Loan amount + Residual Value.

Where:  

LAA= loan amount; RDP=Interest rate; TLA=lease term; RVA= Residual Value; MPA=monthly payment.

02 Dec, 2014 | 1 comments

1 Comments To This Article

  • Lease Calculator
    Myke

    on Nov 29th, 2014 at 10:41

    #1

    I would rather pay one time my car than taking by lease!

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