auto
Comparing the leases -- do the math and save
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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