auto

Comparing the leases -- do the math and save

 Example Deal 1 Deal 2 The capitalized cost Capitalized (cap) cost: A leasing term that refers to the price of the car. The lower the capitalized cost, the lower the monthly lease payment. The cap cost is negotiable and can be reduced by a cash down payment, trade-in or a manufacturer's rebate; it can be increased by the loan acquisition fee or costs left over from a previous lease. of the car \$25,000 Less your down payment -2,000 - - New capitalized cost \$23,000 Less the residual value Residual value: The amount agreed upon to represent the value of the car at the end of a lease. -11,250 - - Equals the depreciate Depreciation: An asset's decline in value over the course of its useful life. Autos depreciate steeply in their first few years, beginning at the moment they are driven off the lot. In an auto lease, a charge for depreciation is the chief part of a consumer's monthly payment. \$11,750 Divide by number of months in the lease ÷     36 ÷ ÷ Equals monthly depreciation amount \$326 New cap cost plus residual value \$34,250 Times money factor Money factor: A leasing term that expresses the cost of borrowing. It is similar to the interest rate paid on a conventional car loan, but it is expressed as a difficult-to-understand fraction. To convert the money factor to a recognizable interest rate, multiply it by 24. For example, a money factor of .00345 x 24 = 8.28 percent interest. The money factor is negotiable, and consumers who lease a new car should look for a money factor close to the current interest rate charged for new-car loans. x .0026 x x Equals lease company fee \$89 Monthly depreciation \$326 Plus lease fee +     89 + + Equals monthly payment \$415
Source: The Insider's Guide to Buying and Leasing a New or Used Car

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