When you buy a car new - lets say for 20K - you pay interest on the whole 20K value.
When you lease for 3 years - lets say dealer decides that car is worth 10K after 3 years - you end up paying
-10K depreciation - basically the principle
- Interest on the 10K residual value (remaining value)
- Interest on the diminishing 10K value (which is depreciated value)
- Taxes etc.
- $595 acquisition charge which seems standard.
-$350 charge upon returning the leased vehicle.
You also have an option to buy back the vehicle at 10K later on.
So for the poster it costed
2000 taxes
600 acquisition and 350 return charge
350 times 36 for lease
= 15550 / - for leasing the car over 3 years.
He can also buy it back for 60% of the value that was stated.
Sort of. The lease payment is made up of A) depreciation. B)the interest on the average price of the car during the lease term, and C) taxes.
The depreciation is set by the manufacturer, not the dealer, as is the money factor. The dealer can (and will try to) mark up the money factor which is why it is important that you find this out. The Edmunds forums is where I get mine from (Mazda Leasing thread in this case).
The money factor can be converted into a regular APR by multiplying it by 2400. In lease math though, money factor is used to save complex APR calculations.
Taxes are handled in different ways by different states. For example, Maryland requires that you pay the taxes on the negotiated price of the car, not the payment. I believe Texas does the same thing. This adds a cost to leasing in those states. For example, in MD, the tax on a $30,000 car is $1800 and you will pay that whether you lease or finance. The tax in a state that taxes just the lease payment (at the same rate) would be about $1100. It really adds up when you start leasing big German cars! However if you buy it out at the end and then sell it, you do not pay taxes on the purchase.
So IF YOU PLAN TO LEASE, learn the lease math so that you understand what is going on. There are several tricks that the dealer can do (and he will try his best) to inflate that payment, the difference of which goes into the dealer's pocket.
There is also a great app called LeaseMatic that will tell you what the lease payment should be.
Good luck.