auto
Three forms of auto financing
A comparison of costs
|
Conventional loan
7.5% interest | 36 months | $541 | $19,475 | Y | $19,475 |
Conventional lease
0.00264 money factor | 36 months | $271 | $ 9,762 | N | $20,020 |
Lease-like loan
7.5% interest | 37 months | $288 | $10,642 | N | $20,900 |
Sources: Palm Beach Toyota and The Payment Shaver Co.
For purposes of comparing monthly payments on loans, leases and the specialty, hybrid loans, we have assumed that the purchase price of the car is $17,392.50 and that after three years -- under either the lease or the lease-look-alike loan -- the residual value of the vehicle is $10,258.
Traditional loans and lease-look-alike loans carry interest. For traditional leases, interest is replaced by a monthly fee based on something called a money factor.
To arrive at the monthly lease fee, the purchase price is added to the residual value and then multiplied by the money factor. A Toyota dealer in West Palm Beach, Fla., said the money factor on his Camry LE leases ranges from 0.00254 to 0.00274, so we assumed the middle ground, and used a money factor of 0.00264 in our calculations. With a $17,392.50 purchase price on our car, the fee would be $73 a month ($17,392.50 + $10,258 = $27,650.50 X 0.00264 = $73.)
For the lease and the lease-look-alike loan, we assumed an annual allowance of 15,000 miles. In all cases, we looked at a no-money-down, three-year deal, and disregarded taxes and additional charges or penalties of any sort.