Using Lease Calculators
Want to calculate your monthly lease payment? Consider using a lease
If you are considering a car lease, then you might want to know some key
figures involved in the deal: the monthly lease payments, the overall cost
of the lease and how much savings can be made compared to purchasing the
A lease calculator relieves you from the stress of having to know the
complex underlying lease formulae used in calculations. You simply plug a
number of figures into the calculator and hey presto! You get a detailed
rundown of detailed payments, taxes and total lease costs.
Figures you need to get from your dealer about a specific lease you're
interested in include: capitalized cost, estimated residual value at the
end of the lease, the number of months in your lease and the money factor.
Make assumptions and change some of the figures to see how it affects your
lease payments. For instance, residual value is an "estimated" value of what
the vehicle will be worth at the end of the lease. You can input different
estimates to cover different scenarios and assumptions.
As a final note of caution, bear in mind that lease calculators only do
calculations and check the accuracy of abstract mathematical formulae. They
do not tell you whether a lease is good or bad.
Dealer Leasing Tricks
Too often when it comes to auto-leasing, people get so dazzled by the
myriad terms and the jargon thrown their way that they end-up paying
through the nose, relying on a dealer's "help" than their own informed
Here is a look at some of the tricks dealers use to pad their profits and
leave the customers shelling hundreds of dollars more than the deal should
Trick 1: Leasing always a better deal than buying
Dealers use the lure of lower-monthly payments to entice customers to sign
for long-term loans, with terms stretching for five years or more, making
the payments even lower. There are two catches with such lengthy contracts:
higher mileage, exceeding the prescribed limit, and hefty repair costs.
leases charging on average 10 to 20 cents a mile for any extra mile over
the agreed amount in the contract, and warranties only covering three
years, you leave yourself wide open for hefty charges for excessive
mileage and wear and tear.
Trick 2: Cheap 2-3% APR rate on your lease
The dealer is not quoting the interest rate you would be paying on your
lease; he's rather giving you the lease money factor. Whilst similar to an
interest rate and important in determining your monthly payment, a more
accurate rate is calculated by multiplying the money factor by 24. For
example a "cheap" 3% money factor is 24 X 0.003 = 7.2%. This gives you a
better sense of what your annual interest rate on your lease contract is.
Trick 3: Stress-free early lease termination
Dealers know consumer driving needs change and they would like to have the
option of getting out of a lease commitment sometime down the road, before
their lease ends. Truth of the matter is, when you sign for a lease, you
are effectively saddled with monthly payments for the remainder of the
lease term and there is little-choice of getting out early. Lease contracts
carry hefty financial penalties for either defaulting on monthly payments
or terminating the lease earlier than the scheduled term.
To avoid being on the receiving end of such tried-and-true tricks, educate
yourself about leasing. Get down to the nitty-gritty and understand what
the leasing terms used by dealers mean. Crunch the numbers along with him
and understand how they arrived at the monthly payment figure. Don't sign
anything until you've understood all the terms and your numbers much those
of the dealer. Do not let the dealer pressure you into signing; you are the
one to determine whether the agreement is right for you.
Independent Car Lease Companies
To lease, you have two possible choices: either lease through a dealer's
finance source or through an independent lease company.
A conventional dealer has a captive finance source, which can be the car
manufacturer's financial company, such as BMW Financial Services, Honda
Motor Credit or General Motors Acceptance Corporation (GMAC), or a major
national bank such as Chase Manhattan.
Independent lease companies are no financial obligation to any single
one manufacturer financing source, but work with dealers anywhere in the
So which one is better?
Conventional dealers provide better lease-deals on limited-time promotions.
Factory-subsidized cars that have subvented money factors and residuals are
very attractive lease deals and can be very hard to beat anywhere else.
Independent lease companies can offer you unbiased and professional advice
on vehicle selection regardless of make and model. This is because they are
not tied to a single manufacturer or financing source, unlike conventional
dealers who have to sell specific models. They can also be more flexible
regarding negotiating lease terms like residual value and mileage.
Ultimately, if you prefer a more personal and customer-oriented
relationship with your leasing agent, then you will do well with an
independent leasing company.
Single Payment Lease
A prepaid lease is a new type of lease which has made its foray into the
market in recent times. In this lease, consumers forego the cycle of lease
payments if they make a large payment at the beginning of the lease.
There are two amounts in a conventional lease that incur charges and
determine your monthly lease payments. First, there is a depreciation
charge which accounts for the value the car loses during the lease term.
Second is a residual amount which is the projected value of the vehicle at
the end of the lease. The sum of these two charges gives the monthly
payments on your lease.The idea behind a pre-paid lease is to eliminate the
finance charges for depreciation and only account for residual value
charges in a single, pre-paid payment at the beginning of the lease.
Single-payment leases are devised with spendthrifts in mind: no cycle of
monthly payments, a new car every two to three years and no interest in
purchasing the vehicle at the end of the lease. You should only consider
this type of lease if you are concerned about not being able to make monthly
payments and have a lot of cash upfront.
Fees Involved In Leasing
Mention auto-leasing and most people will automatically assume a low-
monthly payment. There is actually more than what meets the eye, and a
number of fees are involved at various stages of the lease process.
At the beginning of the lease, you have to pay a refundable security
deposit, typically equivalent to one monthly payment, to safeguard against
non-payment and any incidental damage done to the car at the end of the
lease. You are also required to pay an administrative charge, called
acquisition fee. Other fees include licenses, registration, title and any
state or local taxes.
During your lease, and you expected to honour your monthly payment
obligations. Any failure to do so will result in late-payment charges.
You have to pay any traffic tickets, emission and safety inspections and
ongoing maintenance costs. Ending your lease early will result in
substantial early termination charges.
At the end of the lease, expect to pay any excess mileage costs, charged
at 10 to 20 p a mile. Any incidental damage done to the car, and deemed to
be above normal, will result in excess tear-and-wear charges. Finally, if
you choose not to purchase the vehicle, then you have to pay a disposition
Luxury Cars And Resale Values
When it comes to ultra-luxury, high-end vehicle leasing, there is no doubt
that the best deals are those cars that hold their value. With this in
mind, we single out a few truths about residual values that consistently
apply to high-end leasing.
The most determining factor when it comes to resale values is public
perception of the brand, not its reliability ratings in quality surveys.
Take the Jaguar for example: it is consistently rated as a quality car, but
because of questionable reliability perception among the public, it takes a
sharp dip in value at the end of its lease-term
Higher-tech options and other cutting-edge features do not necessarily mean
the car will fare better. By the time your car is two years old, better
and cheaper systems will render the laser-guided cruise control, navigation
systems and built-in cell phone obsolete. Look for functional features,
such as automatic transmissions, power windows and wheel-drive to enhance
the vehicle's value in the used-car market.
Used-car buyers view less favorably luxury vehicles that come with big
incentives. These are perceived as questionable in quality and
Ever wanted to terminate your lease early, comfortable with the thought you
weren't going to be hit with hefty fees? You can if you transfer your lease
to someone else.
Trading a lease is the best option for people who want to terminate a lease
early and don't want to pay the large termination imposed by most lease
agents. It can also be an alternative to get out of a lease for far less
than you would otherwise pay your original lease company for extra mileage
and wear-and-tear charges that can run into the thousands of dollars.
For a small fee, you can advertise your car lease for assumption to a large
number of potential buyers on the look-out for leases on the Internet. Such
services include LeaseTrader.com, the originator of online lease-trading
and the biggest online marketplace where most lease transfers take place,
and smaller marketplaces such as BreakAlead.com and TradeAlease.com
Before swapping your lease, make sure your leasing company approves lease
transfer transactions. Caution must be exercised in choosing a lease
swapping service: make sure they facilitate the whole lease transfer
process, offer online or telephone customer-service help and registered
buyers undergo stringent credit checks.
How To Get Out Of A Lease Before Your Contract Expires 257
How to get out of a lease before your contract expires
When your lease is up, you can simply turn in the keys and lease another
car or buy a new one. But how about getting out before the lease ends?
Maybe you can't afford the sky-high payments on that silky Jaguar JX V6
model anymore or you've just had a baby and you need a larger and more
Unfortunately getting out of a lease is not as easy as getting in! A
leasing contract is difficult and expensive to terminate early. Simply
turning in the keys and walking away from a lease can result in stiff
penalties. You credit could be ruined and you could even get sued for
breach of contract.
It's not all doom and gloom though. Actually, there is a number of
options available to you.
You can sell the car yourself and pay off the bank. This can be cost
effective if the market value of the car is close to the buy-out number.
Do not hesitate to exercise this option even at a loss if it happens to be
lower than the termination fee.
Your best option, though, is to transfer your lease for someone who would
"assume it" and take it off your hands. There is a whole set of potential
buyers looking for short-term leases without all the hassle and extra
costs. Check with family and friends or use the services of lease-
assumption websites, like swapalease.com, to list your car. Make sure you
check the credit worthiness of the new lessee and provide the car in good
The Residual Value Of Leasing
If you are in the market to lease a vehicle, you will hear the term
"residual value" recur like a leitmotif. A residual value does not only
affect your monthly payments, but is equally used by leasing companies
to determine any penalties should you break your lease early and how
much to pay if you decided to buy the vehicle at the end of your lease.
Let us first start by looking at the meaning of residual value. The
term "residual value", refers to the value of something after it has
been used for some time. In leasing lingo, it refers to the
depreciation of the vehicle's value over the life of its lease.
So how does it exactly affect your monthly payments? When you lease a
car, you pay for the car's value that you use over the lease length.
Suppose you leased an $18,000 car for 2 years: the leasing company
needs to estimate the value of this car in two years time in order to know
how much of the car you will be using during your lease term. That's where
the "residual value" comes into the equation. If the residual value is
estimated to be $13,000 at the end of your lease, then your monthly
payments will be calculated on the $5,000 you will use over 24 months,
giving an average monthly payment of $208.3 (plus interest, tax and fees).
How about if the car is expected to lose half its value over the same
period? In this scenario, you will be using $9,000 over the same period,
leaving you with a higher monthly payment of $375 (plus interest, tax and
As you can see, residual values are a key factor in determining how much
money to pay on your lease and the higher the residual value, the lower
your monthly fees. This works in reverse if you build a bond with your car
and decide to purchase it at the end of your lease. If we stick with the
same example above, the lower monthly payments in the second scenario come
at the cost of paying substantially more to buy your car at the end of the
So, since the residual value is so important, how do I know which one is
best for me? Well, it all depends whether you want to purchase the car at
the end of your lease. If you don't want to make a large down payment and
you want low monthly payments, then a car that holds with a higher residual
value is a good deal. If you are thinking of purchasing the car at
lease-end, then you need to balance low-monthly payments with a moderate
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