How to Price a Lease

How to Price a Lease

How to Price a Lease

It’s not simple to set prices for the typical lease—which is the primary reason that many landlords wind up giving away rent-controlled units. This article explores the purpose of your lease, how to set the right price, and how to compare rates with real people.



The typical monthly lease payment has 2 basic components: depreciation and financing fees. To find the depreciation, subtract the amount the car will be worth at the end of the lease from the current sticker price. Then, subtract that amount from the sales price you negotiated to find out how much you'll be paying in depreciation. Multiplying depreciation by the interest rate gets you the total lease payment before sales tax. If you're paying monthly sales tax, you'll multiply that amount by the applicable sales tax rate to get your total lease payment. All of these calculations can seem a bit confusing, but once you break it down, you can avoid being overcharged on your lease. Auto leases enable people to drive new cars for a short term while under warranty, and without the financial burden associated with new car purchases. However, it generally costs more to lease a new car for a specific time period than it does to own it (assuming the cost of ownership is prorated over its expected life). Leasing used cars is possible, but not as prevalent. There are many factors to consider in an auto lease, such as the initial down payment, the amount of the monthly payment, the term of the lease, and the average accumulated miles in a year. One characteristic that is unique to car leasing is something called the money factor, which is an alternative method of presenting the amount of interest charged on a lease with monthly payments. Money factor, sometimes called "lease factor" or "lease fee," can be translated into the more common annual percentage rate (APR) by multiplying it by 2,400.

In the case of an automobile lease, the monthly payment on the vehicle is based on the car's expected depreciation and residual value—a predetermined amount that the car will be worth at the end of the lease term—as well as the lease rate, which is usually stated as a percentage. Through monthly payments, the lessee compensates the automobile dealer for both the vehicle's depreciation and for tying up assets in vehicles instead of investing that money elsewhere.There are other factors that determine your lease payments, such as taxes and interest rate. They vary greatly depending on the person and where they are located, however. You can consult your bank or dealership to get an idea for what to expect in those areas. The above list represents the most significant factors as well as some tips on how you can keep your monthly payments lower. Make sure to do all your homework and research before signing a lease, and enjoy your new car! (Source: www.humberviewgroup.com)



Related Articles