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FutureStarrHow to Figure Out the Lease Price of a Car
How much is my lease or loan on a vehicle costing me each month? For most people, this is a question that comes up only after months or years of driving. Popular finance site, Wise Bread, breaks down the cost of a lease in their blog posts. This post is a good place to start and provides a general understanding of what the typical process and cost will be.
The residual is a value decided by the bank or leasing company. It’s just an prediction, and the vehicle’s actual value at the end of your lease will probably be either higher or lower than the residual. Banks estimate residual based on the vehicle you are leasing, the term length, and mileage. For example, a vehicle that’s driven 15,000 miles per year for 3 years (total 45,000 miles), will be worth less than the same vehicle if it’s driven only 10,000 miles per year (total 30,000 miles).The last thing that we need to add into the payment is tax. Lease taxation varies greatly by state. For this example, we will use Minnesota. In Minnesota, tax is levied on the lease payment. This means that we need to calculate the tax for each lease payment and add it to the payment. Some other states tax on the full cost of the lease and require the tax upfront. Some states even tax on the full selling price of the vehicle, creating a huge tax bill and very expensive leases.
A lease is a contract allowing a party to convey property to another party for a specified time, usually in return for a periodic payment. A car lease allows a person to drive a car for a fixed period of time as they make a down payment as well as monthly lease payments until the lease ends. It can help to think of a car lease as a long-term car rental; while car rentals generally last for as little as a day or even just a few hours, car leases average between two and four years. Many leases allow the purchase of the leased vehicles through a purchase option agreement at a specified price once the lease ends. It is important to note that choosing to add such an option at the beginning of a lease will add a small amount to the monthly lease payment. Most car leases can be found at dealerships or private car dealers.It is expected that leased vehicles are returned to lessors in reasonable condition at the end of the lease period. When returned, vehicles will go through thorough inspections (usually a contracted third-party) to ensure that there is nothing out of the ordinary given the mileage accrued. As should be stated more specifically in each individual lease contract, any pertinent damage or faults accrued during the use of leased vehicles that are attributed to the lessee (such as collisions of their doing) will most likely come out of their own pocket. On the other hand, wear and tear can be the financial responsibility of either party, depending on whether visual inspection shows that it was "normal" wear and tear or "excessive" wear and tear. The two are explained in detail below. (Source: www.calculator.net)