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1. How to Calculate a Monthly Lease Payment

Leasing seems confusing to a common person but learning a few basics of calculating your monthly lease payment can make it simple and straightforward. There are multiple steps in calculating a lease payment. Take one step at a time not to complicate the whole process.

A lease payment is comprised of three components:

Depreciation: To start with, you have to pay for the use of the car. The value of the car that you use is actually the difference between the value of the car at the beginning of the lease and the value at the end of the lease. This difference is called the depreciation of the car over the span of a lease term

Loan: The second component is the loan of the car. A lease is similar to a loan in a way that a company is paying the money to buy the car for your use. Then you pay them the monthly payments for using the car. Since the company has paid for the car, it charges interest on the outstanding balance of the lease. It is similar to the interest charged by a finance company on the outstanding balance of a loan.

Tax: The third and final factor is the sales tax on the lease. There is no getting around sales tax and one way or the other you are going to pay sales tax on your lease. The only difference is in the calculation as it is different in different cities.

As mentioned earlier, there are several steps within the three components of a car lease, so we will discuss each step one by one.

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