## Guide to Lease Payments, Lease Calculations and ALG Residual Values

#auto lease calculator
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# Real World Lease Examples and Calculations

## Cap Cost Is Important

Don’t let the dealer tell you not to worry about the cap cost because it doesn’t affect you. It does! It makes a difference in your payments. They keep quoting monthly payments as a distraction. Pay attention to the value of the entire deal.

## How Your Monthly Lease Payment is Calculated

There are 3 components:

1. Monthly Depreciation Fee = ( Net Cap Cost – Residual ) Lease Term
2. Monthly Finance Charge = ( Net Cap Cost + Residual ) x Money Factor
3. Sales Tax (Depreciation Fee + Finance Fee) x Tax Rate

In states like Illinois, Texas and a few others, they tax you according to the gross cap cost up front. This is very unfair because you are only using about 50% equity then returning the vehicle.

### Example

Assume you lease a car for 36 months, with an adjusted cap cost of \$35,000. They give you a residual of 54% after 36 months (\$18,900). You can verify this too if you have the ALG Lease Residual Value Software. They disclose the money factor is .00333 (equivalent to 8% APR).

1. Monthly Depreciation Fee = ( \$35,000 – \$18,900 ) 36 = \$447.22
2. Monthly Finance Charge = ( \$35,000 + \$18,900 ) x .00333 = \$179.49
3. Sales Tax = (\$447.22 + \$179.49) x .06 (Florida Tax is 6%) = \$37.60

Total Monthly Payment = \$447.22 + \$179.49 + \$37.60 = \$664.31

Over 36 months it will cost you \$23,915. If you buy the car at the end at its \$18,900 residual value, your total cost would be \$42,815 + up front fees (bank fee, dealer service fee, security, etc.) Buying is usually cheaper in the long run. If you had bought the car with 8% APR over the same 3 years your monthly payments would be \$1,162.57, but your total cost is only \$41,852.84.