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FutureStarrCalculate the Monthly Lease Payment for a 36 Month ORR
Here's how to calculate the monthly lease payment and total cost to own. The total cost includes fees, taxes, and possible extra costs like insurance and maintenance fees.
Let us take the example of John, who is planning to buy a car on lease. The lease will be for a period of 36 months and charged an annual interest rate of 6%. John managed to negotiate the selling price to be $26,000 with a down payment of $4,000 and an outstanding loan balance of $5,000. The car is expected to have a residual value of $16,500 at the end of 36 months from now. The applicable sales tax rate is 5%. Determine the monthly lease payment for John.
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. (Source: www.calculator.net)