#### The first part of the lease payment terms that you need to look at is the capitalized net cost.

From an accounting perspective, this is the difference between the sales price and any factory discounts and down payments. The sales price can also be the value of the dealer who agrees to repay the remaining amount of the rental car. Your capitalized net costs, therefore, consist of the down payment and other loans plus the negotiated sales price plus the loan balance.

The residual value is another important part of the leasing calculation. It is calculated by multiplying the sticker price by the residual percentage. This figure is often given by the dealer when you negotiate the leasing terms.

The depreciation fee is calculated by dividing the difference between the capitalized net cost and the residual value by the number of payments. In the first few years, the depreciation costs are higher and then gradually decrease. At the end of the leasing period, most cars have lost more than 60 percent of their value.

#### The financing cost

This is important because it shows you how much it will cost to own the car. There are two ways to do this – APR or rental fee. When renting, the money factor is calculated by dividing the rental fee by a calculation that includes the sum of the capitalized net cost and the residual value multiplied by the months of the lease.

With the APR calculation, the dealer gives you the annual percentage rate of charge, which you then divide by 2,400. To obtain the last monthly leasing installments, you have to add the capitalized net costs and the residual value and multiply by the annual percentage rate of charge. The result is the monthly payments you make for the lease.

#### Sales Tax

In the USA, a sales tax (VAT) is levied on the lease payments. This is the easiest to calculate, as the VAT is multiplied by the monthly amount of the lease payment. You must check with your state to see if this tax is levied on the lease payments.

Your leasing installment is now the sum of financing costs, depreciation costs, and VAT (if applicable).

#### Getting the most for your lease payments

Once you have learned how to calculate lease payments, you need to look for the best offer. Before you decide to lease a car, you should calculate your monthly expenses and check if your lease payments have any impact on utility bills. Put some money aside for emergencies.

Many car dealers will make every effort to move your thoughts from the purchase price and to the lease payments. But the purchase price is very important, and you should negotiate to get it lowered. The value of the car will depend on the purchase price and the residual value. If you like the car, you can decide to buy it.

The residual value is defined as the value of the car at the end of the leasing period. Dealers often try to determine this value exactly, as they receive this value when they sell the car. A car with a higher residual value is good. When calculating the residual value, you should look for cars from other dealers. This will give you a rough estimate of the amount.

The leasing period often extends over 36 or 60 months. The longer the leasing months, the less you pay. Depreciation rates are high in the first few years of the leasing contract and then slow down in the coming months. You need to weigh up how the monthly lease payments affect your monthly income before you decide on either 36 or 60 months.

The mileage of the car will affect the lease payments. If you drive more than the agreed-upon mileage, this means there will be more depreciation and subsequent wear and tear. As a result, the monthly lease payments will increase. Some dealers charge extra if you exceed the set mileage.

When negotiating the leasing contract, it is important to pay attention to the small print. Often there are hidden costs that the dealer builds into the lease. If this is your first time doing this, you can go with a friend who knows about leases, or with your lawyer.

#### Conclusion

Leasing a car is a good option if you want to test drive before you decide to buy a car. However, leasing calculations are subject to many assumptions. You have to go through each calculation and find out the dealer’s methods for making the figures.

Depreciation rates tend to be higher in the first few years and lower the following year. You will also need to determine your monthly expenses and decide whether to opt for a 36-month or 60-month lease. In some states, there is a sales tax, which is calculated from the monthly leasing installments.

It is of utmost importance to know how to calculate your lease terms to avoid being cheated. Use these calculations to look for an affordable lease.